From the podcast: Facts Figures and Fallacies on the Front Lines
As the year draws to a close, businesses and organizations embark on the crucial task of year-end bookkeeping. This process is not only essential for tax compliance but also provides valuable insights into the financial health of the entity. In this comprehensive guide, we’ll explore the key year-end bookkeeping tasks that will help you wrap up the fiscal year on a strong note and set the stage for financial success in the coming year. Check out our podcast for this blog!
Year-end checklist for bookkeeping tasks
1 – Review payroll-related information
- All state and federal payroll reports are filed
- All state and federal payroll taxes are paid
- Benefit changes or withholding of fringe benefits
- Deferred compensation (accrual basis)
- Employee information
- Employee wages and deductions
- Raises and bonuses
- Time-off (or PTO) balances
- Balances of employee advances
2 – Complete the appropriate forms from employees and contractors
- File W-2s (employees) – due Jan 31
- File 1099-NEC (contractors) – due Jan 31
3 – Take inventory
For small businesses filing on a cash basis, this step may not be necessary. However, if you have a significant inventory number and you file on an accrual basis, this applies to you. Get an accurate count of the materials and supplies at cost. Match your inventory totals to your balance sheet. If you see inconsistencies between your inventory count and balance sheet, fix that issue by offsetting the difference to the related COGS account.
4 – Scan in all business receipts
If you are already on an accounting software maintained by an accountant, then scan in all your receipts to a safe place that you will be able to reference in the future.
If not on an accounting software and you rely on receipts to account for your deductions, scan in all your receipts and categorize them by type of expense for the entire year.
5 – Check your payables and receivables
If your business operates using an accrual system, it’s important to check your payables and receivables for tax purposes.
- Payables (outstanding bills sent to you by other entities)
- Receivables (outstanding invoices you sent other entities)
At the end of the year, it’s wise to tally total payables and receivables, because:
- It offers a good picture of your year-end financial position
- It helps you determine and view if you’re missing invoices
6 – Record Interest on Notes Payable
If you have notes payable related to your business, whether it is a business car, equipment, or a small business loan, all the interest spent on those loans are deductible. Contact your financial institution for total interest paid on each note for the year and make sure to take the deduction on your tax return.
7 – Fixed Asset Listing
- Depreciation schedule or fixed asset list for all business assets. If you have a CPA, they should be maintaining this for you. But you’ll need to update them with any disposals (sales or junked items) or new purchases throughout the year.
- Purchases – Cost and date of purchase (if a trade-in, provide trade-in paperwork)
- Disposals – sales price and disposal date
8 – Get your fiscal records in order
There are multiple steps to take to get your fiscal records in order prior to year-end. Here are some key year-end bookkeeping procedures:
- Reconcile your bank accounts and credit cards with your check register (record of deposits and disbursements) so you can compare the bank statement to your deposits and disbursements, whether by check, cash, money order, or other payment app.
- Do a profit and loss review: Create and review your profit and loss statement to assess the profits and losses of your business.
9 – Identify a plan for the new year
In terms of your bookkeeping policies and procedures, take a pulse on what’s working and what’s not and review your small business’ numbers so you can set an intention to have a successful year the following year and get a start fresh in January.
- If you currently have personal and business combined, no matter how small you are, we recommend opening business only bank and credit card accounts. Keep personal and business separate.
Conclusion
This can be an overwhelming task. Most of our clients are on QuickBooks Online (QBO). This involves inviting our firm as an accountant user in order to give us access to their account and we go in and do a “QBO clean-up” so that we can go through all the above steps in detail and give tips on how to make it the most effective and efficient going forward. Please reach out to us at 940.539.3238 or contact us through our website if you require any assistance.
Disclaimer: The information provided above is not meant to be legal or tax advise. You should consult your CPA and attorney to determine the best course of action for your situation.
Mitzi E. Sullivan, CPA is a cloud based professional services provider
specializing in cloud accounting.