Can you believe the end of the year is already here! It is and that means the time has come to prepare your small business’s final year-end accounting and bookkeeping. If you have put off your company’s bookkeeping, don’t feel bad. It has been a hectic and stressful year, especially for those who own a small business. Let’s take a look at exactly what you should review and have prepared for your small business's year end books.
Ensure all Items on Your Balance Sheet are Reconciled
At year end it is imperative you reconcile your small business’s balance sheet. Ensure you have properly recorded and amortized any new capital purchases and loans. The purpose of reconciliation is to compare general ledger balances with matching documentation to guarantee the ledger’s balance is accurate and all items like interest are properly. Examples of supporting documentation include purchase agreements and loan statements.
If you find your general ledger does not align with the supporting documentation, don’t panic. Through a few easy entries and reconciliations your books will be in perfect shape.
If you feel lost or overwhelmed, don't feel bad. That is what our bookkeeping experts are here to help you with!
Ensure Year-end Inventory is Correct
The end of the year is the perfect opportunity to verify your inventory count. Inventory count affect both your balance sheet and profit and loss statement. Taking inventory before the start of the new year will also allow you to have the information necessary to plan and strategize for the upcoming year. Counting inventory also presents an opportunity to identify items that are in-demand and remove or scale back inventory of those that underperformed.
Inventory counts are also important in the context of end-of-year tax returns to gauge your company’s true income/loss for the year. In particular, the cost of goods sold (COGS) that represents the cost of materials to make items or the actual items will help your small business overcome tax and accounting-related challenges.
Ensure Payroll is Reconciled for the Year
Payroll reconciliations ensure all your year end tax forms are accurate and everything has been recorded properly to your profit and loss and balance sheet. Reconciliations also make it that much easier to gauge your small business’s financial health. Determine if the transactions on the books equal what is shown across all your tax forms. This would include your W3’s and State tax forms.
Our experts at Bookkeeping & CFO Solutions , LLC ensure everything is reconciled and your year end financial statements tie to all your year end tax forms.
Issue all Necessary Year-end Tax Forms: W-2s and 1099s
Prepare the forms necessary for the upcoming tax season and you’ll sleep soundly knowing you have done your part to sidestep potential penalties for a late filing. A W-2 form must be filed for each employee who was on your payroll during the year. W-2s must be issued by January 31 to employees and W3’s must be filed with the taxing authorities. Furthermore, small businesses are required to provide 1099 forms to individuals or businesses to whom payments were made in excess of $600 during the past year. A copy of the 1099 must be provided to these contractors by January 31 and the appropriate forms filed with the taxing authorities.
Review and Reconcile AR
Take a close look at your accounts receivable as the year comes to an end. If you are owed money, follow-up on those outstanding invoices to ensure you are paid in full. Be proactive, communicate your desire for the money owed and your persistence just might pay off in the form of a timely payment.
Your ending AR balances must be an accurate representation of what you anticipate to collect. Anything deemed uncollectible should be written off to bad debt.
Review and Reconcile AP
Your product and service providers need and deserve payment in full just as much as your small business. Reconcile and review your accounts payable. Ensure you have accrued, or recorded, any year end bills that have not yet been paid. Review and ensure all your payments to vendors match to their bills and all that expense transactions recorded have a vendor name so 1099’s are accurate.
Scrub Your Profit and Loss Statement
Analyze your profit and loss statement in detail. Identifying items that may be recorded to the incorrect accounts and fixing them before taxes are filed, will ensure your ending net income and tax return are accurate. Reviewing this report in detail will also assist you in planning for the upcoming year and identifying areas you want to focus on or change to increase your bottom line in the New Year. Heightening your awareness of your profit and loss statement will assist you in having a better understanding of the financial health of your business.
The Experienced Year End Bookkeeping Providers are a Call Away
Bookkeeping & CFO Solutions 5280 is your go-to source to get your books clean and ready for year end. Our expert small business accountants and bookkeepers are here to help!
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