The year is coming to a close once again. While most people are counting down the days until their year-end holiday, accountants are gathering their clients’ year-end documentation. As well as the annual close, accountants still need to finish up reporting for December and the quarter.
With so much on the checklist, December is one of the busiest months of the year for accountants. Its hectic nature is perhaps beaten only by New Year, and the start of another tax season. To avoid a busy start to 2024 mixed with the January blues, smart accountants often spend December gathering client info.
In this article, we’ll be delving into how and why accountants can use the end of another year to their advantage. In addition to the benefits of gathering client info early, we’ll explore exactly how you can go about gathering the necessary info from your clients for a smooth transition into tax time.
Advantages of Gathering Client Info in December
First, let’s dive into the advantages of reaching out to clients before tax season. These include:
Easier Year-end Closing - If your clients’ fiscal years are coming to an end in December, you should already be gathering their statements. Any discrepancies found in these documents can indicate what additional information you’ll require. If the flow of communication is already good, you’ll be able to easily request extra info necessary for tax time.
Proactive Issue Resolution - Leading on from the above, if issues start to arise such as delays or missing documentation, you can begin to resolve these before the rush of tax season. This will also give you a good idea of the clients you may need to chase or work closely with during the New Year.
Optimized Tax Planning - Gathering client info early will give you ample time for thorough tax planning. This will allow you to maximize opportunities for deductions and credits, and minimize liabilities for both individuals and businesses. You can then share these plans with your clients, leading to…
Improved Client Relationships - By engaging with your clients and preparing them for tax time early, you can help them avoid missed deadlines and penalties. Not to mention, for business clients, you’ll have their balance sheet, profit and loss statement, and cash flow statement filed on time. This will strengthen your relationship, leading to a smoother tax season overall.
Strategic Business Planning - Another benefit for clients and accountants alike is your ability to contribute to business planning. Gathering early insights into your clients’ financial positions can help them set realistic goals for the upcoming year. Of course, this is not always your main priority during tax time, but it will contribute to a trusting and transparent relationship.
Efficient Resource Allocation - As mentioned, requesting client info early will help you discern which clients will need more of a push as tax time looms. With this knowledge, you can prepare your staff and allocate resources to ensure all clients receive the same, high standard of service they’ve come to expect from you.
Reduced Workload in January - Finally, the main advantage for smart accountants who gather client info in December is the ‘reduced’ workload. With methodical preparation and prioritization of December’s deadlines, gathering client info at the end of the year mitigates the tax season rush.
How Smart Accountants Gather Client Info in December
Now that you know why accountants might begin gathering client info in December, you’ll need to know how best to do just that. Here are some important things to consider when reaching out to clients and explaining your process:
- Efficient Communication
For many accountants, it will come as no surprise that, while gathering client info in December is a smart move, most clients have other things to think about.
However, it’s no secret that clients prefer proactive service. A 2017 study by Accountex Group found that 72% of small businesses had changed their accountant because their customer service wasn’t up to standard. Even if they don’t provide their info in ample time, clients will likely still appreciate your forward-thinking and motivated attitude.
To add to this, even if you don’t gather all of your client’s necessary documents for tax time, it’s wise to put the thought in their head. For those clients who tend to leave it until the last minute, when you do start making official requests, it won’t come as such a shock.
But, efficient communication doesn’t just refer to accountants and their clients. Depending on how your firm operates, client info may have to go through several individuals in preparation for tax time.
According to Canopy, over 60% of accountants feel they waste time communicating with their colleagues and other staff. With December already one of the busiest months of the year, internal communication needs to be top-notch to ensure you can begin gathering client info early.
Ensure that you and your colleagues:
- Use a centralized calendar or project management system
- Make time for regular, if brief, team meetings
- Encourage an open and detailed dialogue
- Make use of internal messaging platforms
- Make use of revision control software
- Set clear expectations for deadlines and results
- Foster a collaborative culture
Ultimately, if your practice follows suit and everyone gathers info for tax time early, you’ll be better equipped to work as a team when New Year rolls around.
- Strategic Data Collection
Some information necessary for tax time will be unavailable during December. W2 and 1099 forms are commonly issued in January, so there’s little point in requesting these from your clients. The same goes for certain bank statements, retirement account statements, and investment statements.
However, other documents, such as…
- Cash-flow statements
- Profit and loss statements
- Balance sheets
- Deeds and mortgage statements
- Educational expense records
- Healthcare documents
- Charitable donation records
- Reports of additional income, bonuses, and windfall
…are available at the end of the year and are even necessary for year-end reporting. Encouraging clients to share information, where available, will ensure a smooth and stress-free tax season for both of you.
If a client has an array of healthcare documentation or multiple kinds of educational expenses, for example, advise them to get these to you early. Even if they don’t send you all the necessary tax time info, you’ll be able to get a jump on the most time-consuming aspects of their tax planning.
Additionally, even if bank statements and investment statements aren’t available, you can request the most recent versions of these documents. This will give you a good idea of what to expect when the final documents are sent through.
Some tips for strategic data collection include:
- Provide clear instructions on what info you’d like to receive early
- Create checklists for clients that they can use throughout tax season
- Set soft deadlines and explain their benefits to clients
- Encourage your clients to keep records digitally where possible
- Utilize cloud accounting software for secure document submission
- Store documents irrelevant to year-end reporting in clear and separate spaces
- Offer early guidance on any new tax rates and regulations
- Consider organizing Q and A sessions for your clients
- Preparing for Tax Season
Another advantage of early gathering of client info necessary for tax time is that it will give you an idea of the workload you’ll be taking on for the first four/five months of 2024.
As you likely have a lot to focus on at the prospective end of the fiscal year, you won’t need to, and shouldn’t, spend time working on tax documentation. However, it can be beneficial to give the info your clients have provided a once-over, identify any potential bottlenecks, and even draw up a workflow plan.
Review Processes and Implement Changes
Now is the time to implement time-saving measures that will assist you in the New Year. Consider assessing your current systems and tools to identify areas where technology or process enhancements could be made.
For example, according to Xero, 61% of accountants believe manually reconciling bank transfers takes up the majority of their time. This crucial aspect of tax preparation can be a drain on resources when tax time rolls around. Automation can help speed up this process throughout the year, providing you with organized financial records when it comes time for reporting.
Get the Jump on Changing Tax Codes and Regulatory Changes
Finally, ensure you’re aware of any new compliance measures and regulations you’ll need to abide by for tax season. This also relates to internal communication, as it can be a good idea to share any news regarding tax laws throughout the firm. This way, you and your colleagues will know exactly how documentation will be structured in the New Year. With good knowledge and clear expectations early on, checking and rechecking work to ensure everything is accurate and compliant won’t be so stressful.
In Conclusion…
For accountants, December is hardly the easy month that it is in other industries. Your clients will likely be able to enjoy their holiday season only because you refuse to wind down and enjoy yours.
However, amid the busy year-end season, you have an opportunity to facilitate a far-less-stressful tax season. This is why smart accountants align December’s to-do list with their tax time responsibilities and begin collecting client info early.
As well as ensuring you have ample time to gather documents, draw up a plan, and identify potential issues, gathering client info early can strengthen your relationship with your clients, allow you to optimize their tax planning, and provide financial insights.
To begin gathering client info, reach out to your clients and share your intentions. Clearly explain what you need from them and set soft deadlines. You should also ensure that internal objectives and communication align with this early gathering of client info. Spend some time reviewing your firm’s processes and suggesting changes that will lead to effective tax season reporting.
With good time management and a proactive mindset, you can use December to lay the foundations for a seamless and rewarding tax season. Good luck!
Sources
- https://qxaccounting.com/uk/accountants-are-you-ready-for-the-tax-season/
- https://www.accountingweb.co.uk/practice/general-practice/get-set-for-self-assessment-season
- https://www.spendesk.com/en/blog/year-end-accounting-checklist/
- https://www.sage.com/en-gb/blog/self-assessment-less-stressful-practice/
- https://www.accountingweb.co.uk/tax/hmrc-policy/the-accountants-guide-to-surviving-december-and-january
- https://www.businesswire.com/news/home/20221024005669/en/70-of-Accountants-Find-Clients-are-Usually-More-Responsive-Than-Coworkers
- https://www.accountingweb.co.uk/any-answers/how-do-you-get-personal-tax-info-from-clients-0
- https://blogs.mileseducation.com/news-and-events/how-internal-communications-makes-accounting-firms-a-game-changer/
- https://www.ignitionapp.com/blog/how-to-collect-and-track-client-information-efficiently/
- https://www.glasscubes.com/client-information-gathering-for-accounting/
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- https://www.smartvault.com/taxing-to-relaxing/
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