Business Owners: Year-End is Fast Approaching—Are You Ready?
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Here are some year-end bookkeeping tips to help you wrap up the financial year smoothly and prepare for tax season:
1. Organize All Financial Documents
Collect and organize invoices, receipts, bank statements, and credit card statements. Keep both digital and hard copies as backups.
Ensure all expense receipts are categorized properly, especially for deductible items.
2. Reconcile All Accounts
Reconcile your bank, credit card, and loan accounts to make sure they match your books.
Double-check PayPal, merchant, and other third-party processor accounts, as these are often overlooked.
3. Review Your Accounts Receivable
Follow up on outstanding invoices to improve cash flow before year-end.
Consider writing off bad debts if collection seems unlikely, but consult with a tax professional first.
4. Review Accounts Payable and Expenses
Ensure all bills are recorded, and make payments on outstanding bills if cash flow allows.
Record any accrued expenses (expenses that have been incurred but not yet paid) for a more accurate year-end financial picture.
5. Check for Large Purchases or Investments
Identify any large purchases or capital investments made throughout the year and make sure they are recorded as assets rather than expenses.
Assess whether to expense or capitalize new purchases, depending on tax rules and your strategy.
6. Analyze Your Profit & Loss Statement
Compare income and expenses monthly to identify trends and unusual spikes or drops.
Look for any expense categories that seem high; this can help you identify areas for cost-saving in the coming year.
7. Update Inventory Records
Conduct a year-end inventory count, if applicable, to ensure inventory records match physical quantities.
Record any shrinkage, spoilage, or obsolete inventory that needs to be written off.
8. Evaluate Payroll and Taxes
Verify that payroll taxes are up-to-date and accurately recorded.
Review W-2s and 1099s, if applicable, and ensure they are accurate before distributing them to employees and contractors.
9. Prepare for Year-End Tax Filing
Consult with your accountant to confirm deductible expenses and end-of-year tax strategies.
Consider pre-paying certain expenses to maximize deductions if this aligns with your cash flow and tax strategy.
10. Review and Update Your Chart of Accounts
Evaluate your chart of accounts for unnecessary or duplicate accounts. Simplifying will make bookkeeping more efficient in the future.
Rename or reorganize accounts if it will improve clarity in reporting.
11. Assess Financial Statements
Review your Balance Sheet and Profit & Loss Statement for accuracy, checking for discrepancies or unexpected balances.
Generate a Cash Flow Statement to review cash in and out for the year, which can help with budgeting and planning for the next year.
12. Set New Financial Goals and Budget for the Next Year
Use the insights from this year’s financials to set realistic financial goals and create a budget for the coming year.
Consider areas to increase profitability, reduce costs, and improve cash flow management.
Conclusion
Year-end bookkeeping can be an intensive task, but following these steps will ensure you enter the new year organized, tax-ready, and well-informed. For complex tasks, consider consulting a bookkeeping or tax professional to ensure everything is done correctly.
Balanced Integrity Bookkeeping is ready to help you get tax -ready!
Free Consultation!
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