As the year ends, it’s essential for small businesses to get their financial house in order. These year-end bookkeeping tasks will help you gain a clear financial picture, prepare for tax season, and set your business up for a successful new year.
Here’s a checklist to guide you:
- Reconcile All Bank Accounts: Ensure all bank and credit card accounts are reconciled to catch any discrepancies and have accurate account balances.
- Review Outstanding Invoices: Look over your accounts receivable and follow up on overdue payments. Clear up old invoices before the new year begins.
- Clear Up Unpaid Bills: Settle any outstanding vendor bills or at least schedule payments. This can help improve vendor relationships and keep your financial records clean.
- Check Payroll and Employee Records: Verify that payroll records are complete and accurate. Also, confirm that all employee and contractor information is up to date.
- Prepare 1099s for Contractors: If you’ve paid contractors more than $600, you’ll need to file 1099 forms. Start organizing this information to avoid delays. Download our Decision Tree for Who Gets a 1099 guide to help you plan.
- Record Depreciation and Amortization: Ensure that any depreciation and amortization of assets are accurately recorded, as they impact your tax calculations.
- Update Inventory Records: If you hold inventory, perform a physical count and adjust your records accordingly. This is also a great time to identify obsolete stock.
- Organize Receipts and Expense Reports: Compile all receipts and expense reports, ensuring each is categorized correctly for deductions and tax reporting.
- Adjust for Prepaid Expenses: Review any prepaid expenses and adjust your records to reflect the correct expense allocation.
- Verify Loan Balances: Make sure your loan balances are accurate in your books. Check for any interest that may need to be recorded.
- Review Income Statements and Balance Sheet: Analyze these key financial statements for accuracy and clarity. Make adjustments to improve transparency in your financial standing.
- Examine Business Expenses: Review expenses to identify any last-minute deductions you might be eligible for, as well as areas where you can cut costs next year.
- Prepare for Tax Filing: Organize your tax documents and ensure everything is in place for a smoother tax season. View our 10 Year-End Tax Tips for Small Business Owners infographic.
- Run Year-End Financial Reports: Generate a profit and loss statement, balance sheet, and cash flow statement to get a comprehensive view of your financial health.
- Meet with Your Bookkeeper or Accountant: Discuss your business’s financial performance and get advice on ways to improve your bookkeeping processes.
Scenario: Reviewing Outstanding Invoices
As the year ends, Sarah, a small business owner, reviews her outstanding invoices. She notices two clients haven’t paid, totaling $5,000. By reaching out, she collects one payment in full and arranges a payment plan with the other. This timely action improves her cash flow and keeps her books accurate going into the new year.
What If Sarah Missed This Task?
Had Sarah skipped this review, she might not have noticed the unpaid invoices until much later, risking a $5,000 loss and potential cash flow issues. This simple step shows why year-end bookkeeping tasks are essential for financial stability and growth.
Ready to Tackle Year-End Bookkeeping?
If this list seems overwhelming, you’re not alone. At HireEffect, our expert team is here to handle your bookkeeping so you can focus on running your business. Contact us today to get the support you need to close out the year with confidence and start the new year strong.