With year’s end fast approaching, now is the time to get a handle on your business finances by creating a year-end accounting checklist.
This will ensure that your financial records are accurate and compliant with state and federal tax laws and that you are prepared for the upcoming tax season.
A year-end financial check-up is important for all businesses and especially for small business owners who may have less resources than larger firms.
Taking the time to review your finances before Dec. 31st will lead to more informed decisions and ensure you are on a stable financial footing going into the new tax year.
Here are 8 ways to help you do that.
1. Process your company’s year-end data – to evaluate your company’s financial performance in 2024 and to effectively plan for the year ahead, it’s a good idea to take a moment to analyze your profit and loss statements, your cash flow situation and your company’s balance sheets for the year-to-date.
Your accountant can do a deep dive by verifying that your previous year’s financial data matches with its tax return as well as verifying your current financial statements and reconciling any discrepancies.
Fixing any errors that may be uncovered and then locking in the data so that a final year-end report can be prepared should be part of your financial year-end wellness check.
2. Work with your accountant to estimate any tax liability that you might have – this is especially important to avoid any surprises that may crop up during tax season.
If you’re not already doing it, consider year-end deductions that will lessen your tax liability such as purchasing equipment, contributing to your retirement plan or donating to a favorite charity.
3. Make sure your bookkeeping is accurate and complete – complete the usual bookkeeping tasks such as bank reconciliation, expense tracking, as well as accounts payables and receivables. To boost your year-end cash flow, send out invoices for work completed and be sure to follow up on unpaid invoices.
4. Take an inventory of your assets – part of a year-end accounting checklist should involve conducting an inventory of your products if that applies to your business so that you can reduce waste, track losses and ensure that your asset management reporting is accurate. If you have outstanding payments that haven’t been made to vendors, be sure to handle this now to avoid penalties.
5. Budget for next year – start the new year with a clear financial plan by looking at what worked in the past and what didn’t. Identify areas for cost savings and others where you can make more investments.
6. Examine your payroll records and compliance – if you have several employees, you’ll need to verify that the information you have on them is correct such as social security numbers, tax withholdings and more.
If you distribute bonuses to your workers or you are making other employee benefit adjustments, it’s time to include that in your payroll records.
7. Evaluate your business goals – review the achievements you have made this past year and any shortfalls that may have occurred too. You might want to think about setting actionable goals to close out the year strong so that you are prepared for the upcoming year.
8. Meet with your accountant – schedule a meeting with your accountant or financial advisor to gain additional insight that will optimize your financial position. Typical documents that an accountant would look for when analyzing your year-end financial health include bank and credit card statements, loan statements, year-end tax forms such as 1098s, 1099s, W2s, and others, as well as last year’s tax return.
With December 31st around the corner, it’s important to work on a year-end accounting checklist to avoid stress and to maximize opportunities for your business. If we can be of assistance, please do not hesitate to reach out to us at [email protected].
