Digital Dealer Magazine – Sandi Jerome
There is no reason why your office staff has to spend the first weeks or months of the year consumed with the year end or 13th month process.
We spend the first part of every year consumed with the prior year. There are the dreaded 13th month entries that are a double-edged sword; a huge amount means smaller tax payments, but it also means that you lost money. Using a 13th month is a way to sweep dirty amounts under the carpet during the year until we can vacuum them out by creating 13th month entries in the DMS at year end. For your accounting office this time of the year can be horribly stressful as they work frantically to close the 13th month before too much time goes by and the DMS sits straddled between multiple accounting periods. The 13th month is a DMS invented term for older legacy DMS systems that use a bucket method of accounting and need a place to hold those entries while continuing to create January transactions. Newer systems are date sensitive, so the concept of a 13th month is actually a “December do-over” after cleaning the books, reappraising used vehicles, writing off bad debts, fixing the parts inventory and performing actual LIFO calculations.
Hopefully by time you read this article, your 13th month is complete, but is there a way to make the 13th month go smoother next year? There is no reason why your office staff has to spend the first weeks or months of the year consumed with the year end and 13th month process. Some of these chores can be done earlier. For example, the used write down can be done the first week of December. What about the units that are bought or taken in trade later in December? You can’t write those down; those should be at the right value.
Another suggestion is to create a prepaid account for 13th month entries and when the dealer or manager has approved a write off, make your adjustment to the schedule, AR account, inventory account, etc – and debit the prepaid account. Have your dealer or manager sign the entry and put in a folder. Then at the end of the year you’re only clearing that prepaid account; hopefully with a single journal voucher. Make sure enter a good explanation in the Posting description. Find out if anyone requires you to generate a 2nd factory operating report for the 13th Month? If no, then don’t do it, don’t print it, and don’t mess with it! It is time-consuming and for what? It does not contain operating information that this report was designed for. Instead print and download a Trial balance for your final operating December. Make your entries for the 13th month, then print and download the Trial balance again. Send that file to your accountants. The difference between the profit accounts should be your adjustment in 2017 to retained earnings that you’ll need to explain to various creditors when they notice the difference in a few months.
What about the other yearend headaches; W2 and 1099 forms? As many of you probably found out they moved our deadline to submit W2 forms from Feb 28th to Jan 31st – although some of the states still allow Feb 28th. This year, I ordered those forms by December 10th and decided to do them much earlier. I ran the 1099s on blank paper early in December and unchecked the corporations that had been checked in error and sent out emails to get the missing Taxpayer ID# and addresses. By Dec 28th, we had paid our last payroll and AP so I ran reports 940, 941, W2, W3 and made sure all payroll totals balanced, all W2 info was right (addresses, names, SSN.) On Dec 30th I printed the actual W2 and 1099 and payroll reports. What if they had terminated someone on that Saturday, December 31st? Unless they got a paycheck printed and in their hand by 12/31/2016, their wages cannot go back into 2016. This meant that I was ready early in January to close the December books like any other month and be a normal CFO for the month of January. In the past, I spent too much time focused on a year and month that was over instead of finding ways to have a great 2017 ahead of us and make more money.