The end of the year is a busy time for your business from an accounting perspective. Along with closing the books, you need to prepare for the next year and maybe do a little catch up bookkeeping.
You have a lot on your plate already. It’s easy to go off course and overlook important tasks. Use this year end bookkeeping checklist to stay on track.
Closing the Books: Your Year End Bookkeeping Checklist
Your individual business may have unique tasks for the end of the year, but this comprehensive checklist covers some of the most important things to take care of at the end of the year.
It’s also helpful to create a closing schedule with deadlines for tasks. Planning ahead and setting reminders for deadlines will help ensure that everything is completed on time.
Gather All Financial Statements
A great first step is to gather all of your business’s financial statements, including:
- Bank statements
- Inventory counts
- Credit card statements
- Payroll reports
- Last year’s tax return
- Merchant statements
- Loan account statements
- Etc.
Ideally, these statements should be in digital format. Digital statements are easier to work with and can typically be imported into accounting platforms.
Collect on Outstanding Invoices and Gather Receipts
Collecting on outstanding invoices can be a challenge because you don’t have control over whether clients pay their bills on time – or at all.
If you have outstanding invoices, consider categorizing them based on their likelihood of being paid before the end of the year. Don’t forget to send out reminders for payments and try to collect on these invoices before year-end.
Now is also the time to gather the receipts needed to close the books.
If employees have invoices or receipts to submit, make sure that you’re communicating deadlines for submission and telling them exactly what you need from them. Provide them with ample time to submit their documents. Consider using tools like Expensify to make this process smoother.
Review Asset Accounts
Next, sit down and review your asset expenses and make note of impairment losses. Calculate the value of all company-owned assets and ensure they’re reflected accurately in your financial statements.
Additionally, you’ll want to reconcile cash accounts and take into account relevant transactions.
Reconcile Transactions
It’s finally time to reconcile all transactions. Make sure that:
- All items are properly classified in your accounting system
- Errors and discrepancies are resolved
- All recorded transactions match bank statements, credit card statements, receipts and invoices
Go over everything with a fine-tooth comb and pay attention to even the smallest details to ensure your business is audit-ready.
Only about one in 100 businesses are audited every year, but it’s still important to be prepared.
Close Out Accounts Payable and Receivable
You’ve done a lot up until this point, and it’s time to begin closing out your accounts payable and receivable. This is done by:
- Noting and resolving outstanding balances. Respective parties should make payments on these accounts as quickly as possible.
- Listing outstanding invoices, including interest and fees, on all invoices owed by a company.
- Contacting the companies with outstanding invoices and requesting payment.
- Writing off any bad debt that will go unpaid.
Accrue Accounts Payable and Receivable
Accrual methods help you visualize revenue earned that has yet to be billed, often due to reporting periods or agreements with the customer. If you’re not using the accrual basis of accounting, you’ll want to skip this step.
Assuming you’re using the accrual basis of accounting, your accounts receivable and payable need to be accrued. We can break this down into two main parts:
Accrue Accounts Payable
Spend time properly tracking your company debts by doing the following:
- Add your accrued payables to your balance sheet
- Review expenses to verify that expenses are listed in the right reporting period
Accrue Accounts Receivable
You can accrue accounts receivable, too. Accruing these accounts means adding:
- Adding all of your outstanding receivables to your income statement as a credit
- Adding debts to your balance sheet
- Monitoring your receivable report for collectible balances
Adjust grants and entitlements
Don’t forget to factor in any grants or entitlements obtained during the fiscal year when appropriate. This could encompass contributions from the government, special tax reliefs, private grants, and so forth.
Simplify Your Year End Bookkeeping
If this checklist seems time-consuming and complicated, that’s because it is. Even for top-performing organizations, the annual close can take 15 days.
For many businesses, the end of the year is a busy season, which makes it even more challenging to find time for these accounting tasks. One great advantage of outsourced bookkeeping is that you’ll save so much time, which you can spend on more important things, like running and growing your business.To learn more about bookkeeping or how we can help you with your accounting needs, schedule a consultation now!
