How do you reconcile your small business records at the end of the year?
Year-end is a busy time for small business owners. With projects needing to be wrapped up, and new year projections to be made, it becomes easy to overlook accounting. But ignoring finances is not an option for owners, as year-end financials are key to setting the company up for success.
Given how important year-end accounting is, we’ve compiled a checklist of the essential things every owner should do before ringing in the new year.
1. Complete Inventory
If your company has inventory, it is a good idea to complete a year-end count of everything that is currently in stock. While doing this, be sure to compare the physical items on hand with all of the invoices and records in order to spot discrepancies. Further, make note of any shrinkage, outdated products, or spoiled and expired goods that need to be written off.
Doing this will help owners make more informed ordering decisions and better plan for the year ahead.
2. Reconcile Accounts
Before the new year, every owner should review their account balances and records to ensure they match. This means that every monthly bank statement, along with credit card activity and outstanding loan balances, need to be cross-referenced.
If the amounts don’t match, investigate where the discrepancy came from (commonly from bookkeeping errors or missed invoices, etc.) and correct it so it doesn’t skew numbers in the new year.
3. Update Expense Records
If expenses weren’t being tracked during the year, it is a good idea to get these transactions documented before a new one begins. Begin by gathering all of the receipts, invoices, bills, and purchases from the year, being sure to categorize them based on the type of expense it is (for example, supplies or equipment).
Not only will doing this help to keep the books organized, but it will save time and energy in the new year when it comes time for tax season, since lists of deductible expenses will already exist.
4. Review Accounts Receivable and Payable
While reconciling financial accounts for the year, owners should also look at their accounts receivable and payable to spot any outstanding bills. If any invoices are determined to be unpaid, they should be immediately followed up with and settled. Doing this gives owners a clearer financial picture of where they stand and prevents potential cash-flow issues from debts or interest piling up.
5. Determine Budget and Goals
The end of the year is the perfect time for owners to review where their company’s finances are as a whole. Doing this helps owners determine if revenue goals were met, and if not, what the reason was. Oftentimes, things like unexpected expenses, maintenance, or poor inventory control put a financial strain on a company. But knowing where the struggles came from will help owners navigate similar issues in the future and develop a more accurate financial plan for the year ahead.
If the idea of completing year-end accounting is still anxiety-inducing for you, consider getting professional help from a CPA or tax professional like us at A.P. Accounting & Tax Services. We’ll be able to review your records and identify any tax-saving strategies, compliance issues, accounting errors, or oversights in order to set yourself up for success in the year to come.
Consider giving us a call at 407-328-5001 so that you can start the new year strong.
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