As we begin a new fiscal period, it’s beneficial to adopt practices that promote efficiency and accuracy in financial management. From reviewing financial records from the prior year to updating tax information, establishing a new budget, and even evaluating and updating technology infrastructure, each step plays a vital role in setting the stage for financial success. Ensuring that records are systematically organized not only simplifies year-end processes but also fosters transparency and accountability within the organization.
We’ll discuss the significance of setting new financial goals, aligning them with the overarching vision of the business, and charting a course for sustainable growth and prosperity. Join us as we complete these essential tasks and prepare to conquer the financial challenges of the year ahead.
The Checklist
To kickstart the new year on the right foot, I’ve curated this comprehensive checklist tailored to your needs. From reviewing financial records to preparing for audits, this guide will help ensure your accounting stays on track for a successful year ahead. I know that processing an entire year of business, as well as projecting your next year, can be overwhelming. This article should help you understand the what, the why, and the how when updating your books. Please feel free to leverage this digital copy of the checklist by selecting “File” and then selecting “Make a Copy”. Now you have your own digital catch-up bookkeeping checklist! You can also find a printable version of the checklist here.
Write-off Uncollectible Debts
At some point, every business will have a customer that doesn’t pay your invoice. At the end of the year, you need to determine whether to hold on to the hope that you will get paid, or write-off the invoice as bad debt.
Correct Miscategorized Transactions
Review all expense categories to confirm that expenses are categorized in the proper account.
Make sure you’re recording everything correctly, including your car lease in QuickBooks.
Review all income categories to confirm that the stated income is sales income subject to income tax and not refunds for expenses or owner’s contributions.
Reconcile All Bank and Credit Card Accounts
Just like balancing your checkbook, you need to review your accounts in QuickBooks to make sure they match your bank and credit card statements. If you didn’t maintain your books throughout the year, start with the last month that was reconciled. If you don’t have a great routine established, it may be worth reaching out to a certified Quickbooks bookkeeper. Reconciliations need to be done in order, completing the oldest month first and working your way up to the current month.
- Gather your bank and credit card statements for all periods that haven’t been reconciled.
- These statements are the source of truth. QuickBooks should always match them, not the other way around.
- Always start with your oldest bank statement, or where you last left off reconciling. Then reconcile each month, one at a time. If there’s an issue with an earlier reconciliation, it affects all reconciliations going forward.
- If you have a lot of transactions to reconcile in QuickBooks, you may not see them in a single window. Use the search and filter features to narrow down the list.
- When you have your bank statement in hand, you’ll compare each transaction with the ones entered into QuickBooks. If everything matches, you know your accounts are balanced and accurate.
Review your Accounts Receivables
Creating an Accounts Receivables Aging Report will give you a detailed view of all customers who owe you money and the age of the unpaid balance. A thorough review is necessary to ensure accuracy prior to closing out your year-end books.
If there are invoices that were paid and still show “open”, an audit of deposits must be done to find and correct the discrepancy.
Reconciling all Loan Accounts
If your business has any debt on the books (vehicle loans, property mortgages, business start-up loans), these must be reconciled at the end of the year.
If you haven’t maintained these accounts in Quickbooks on a monthly basis, you will need the year-end statement from the loan provider and make the appropriate adjusting entry to move any interest or fees paid from the loan account to an interest or bank fee expense account. The ending balance in the loan account should equal the ending balance on the year-end loan statement.
Create a Profit and Loss Report
A Profit and Loss report compares income against expenses to determine the net income of the business. If your income is higher than your expenses you’ve made a profit.
- Once you’ve fixed any transactions that were miscategorized, and reconciled your bank and credit card statements, you should create a Profit and Loss Report.
- Set your date filter for “last year” to capture the entire year’s financial information.
- It’s a good idea to review the detail of each account to ensure accuracy.
Create a Balance Sheet Report
A balance sheet is a financial statement that reports a company’s assets, liabilities, and owner’s equity.
- Now is the time to add adjusting entries for accumulated depreciation on your business assets.
- Create a Balance Sheet Report, setting your date filters for “last year” to capture the entire year’s financial information.
- It’s a good idea to review the detail of each account to ensure accuracy.
End-of-Year Payroll Checklist
- Preview your W-2s before they’re sent to the tax agencies and your employees. If you find an error, fix it now.
- Report company-paid healthcare on your employees’ W-2s if needed.
- Make sure employee wages and benefits are correct.
- If you use direct deposit, send off the year’s final paychecks and pay employee bonuses.
- Report all employee paychecks. If you paid your employees commissions or bonuses, add them to the W-2s.
- If participating, contribute to your employee’s retirement.
- Gather vendor and contractor payments for 1099-NEC reporting. These must be filed by January 31st of each year.
- Run payroll reports for your accountant.
Update Tax Information
- Note upcoming year’s tax obligations and deadlines.
- Stay informed about changes in tax laws.
Budget Planning
- Evaluate previous year’s budget against actual expenses.
- Set achievable financial goals for the new year.
- Develop a budget based on revenue projections and expenses.
Organize Receipts and Invoices
- Establish an efficient system for managing receipts and invoices.
- Digitize paper documents for easier access and storage.
- Ensure compliance with record-keeping regulations.
- Whether you keep a paper or digital file, keep it safe for easy access.
Software and Technology Updates
- Check for updates to bookkeeping software.
- Explore new technology tools for efficiency.
- Provide training on software upgrades if necessary.
Prepare for Audits
- Compile necessary documentation for potential audits.
- Review internal controls to minimize errors or fraud.
- Seek professional assistance if needed.
Evaluate Financial Goals
- Assess progress toward previous financial goals.
- Adjust goals based on current business circumstances.
- Develop strategies to achieve revised goals.
What is End-of-Year Bookkeeping?
Known as “closing the books,” end-of-year bookkeeping is the process of reviewing, reconciling, and confirming that all financial information is correct. Is your income accurately reported? Do your books reflect all your business expenses? Does your books indicate who owes your business money and what liabilities your business is carrying?
What Are Year-End Entries?
Year end adjusting entries are journal entries in a company’s books to record any unrecognized transactions for that period. Depreciation is the most common adjusting entry that is made at the end of the year. Accountants will make adjusting entries after a thorough review of the financial statements to update for tax reporting.
How Do I Start End-of-Year in Bookkeeping?
Change is good – especially when change brings more profit. Consider reviewing and adjusting the following items on a yearly basis:
- Chart of Accounts – creating layers of income and expense categories will show you which products and services generate the most income and which expenses need to be monitored and controlled.
- Products and Services – review these lists to verify that they are set up to map to the proper income and expense categories.
- Sales Tax – if you are responsible for sales tax, check that your tax rate is up-to-date and set up correctly.
- Payroll – if you handle payroll in-house for your employees, a yearly review of the tax rates and payroll update is very important.
- Compare your product and service costs against your competitors – are you keeping up with the trends or do you need to increase or decrease to stay competitive? How does your profit margin meet your growth and sustainability objectives?
- Use your financial statements to develop a budget for your business.
Helpful Tips for Staying Current
In addition to following this annual checklist, staying current with bookkeeping practices, embracing new technologies, and keeping abreast of tax updates are essential for maintaining financial health throughout the year. Consider checking in with your accountant or bookkeeping service to ensure you’re up-to-date with ever-changing tax regulations and able to adapt your financial strategy accordingly. By implementing these proactive measures, you’ll not only streamline your bookkeeping processes but also position your small business for continued success in the dynamic business landscape.
