Being a business owner comes with its fair share of responsibilities. When the year is about to end, you are likely to struggle with bookkeeping procedures. In order to make it through the year’s end with confidence, it is necessary that you follow a detailed year-end bookkeeping checklist as it will ensure that everything gets taken care of. To help you get things in order and transition into the new year right, here are some tips to consider. 

1. Prepare and Analyze Financial Statements

The first thing you need to do once the year ends is prepare and analyze financial statements. The fact is that financial statements provide a lifeline to every business by providing a glimpse into its financial standing. Look at all your reports, outstanding invoices, credit card accounts and credit card statements, cash-flow, accounts payable and receivable, and all financial reports.

When you go through your statements to determine the state of your finances, you’ll have the information you need to forecast for the coming year and beyond. Your financial health gets clearer and your business goals are more attainable.

Financial statements are necessary for preparing tax forms, and they help you, your accounting team or bookkeeping service provider, who can also serve as tax professional when the time comes. Financial records afford you a comprehensive evaluation of your business as you head into that year-end closing.

When you analyze the year-end statements, including the income statement, balance sheet, and cash flow statement, you will get an accurate picture of your operations. The income statement is also called a profit-and-loss statement, and it summarizes the income and expenses for the year. This means that you will get an idea of how much revenue you generated and the payments you had to make.

Some of what you’ll see on the profit-and-loss statement includes revenue, cost of goods sold, operating expenses, tax expenses, and other financial costs. 

As for the cash flow statement, it simply lists all your cash inflows and outflows, along with a few other items of interest. Now, the cash flow can either be positive or negative. If it is positive, it means that you have some cash on hand. However, if cash flow is negative, it means you have to obtain working capital. The balance sheet shows what assets you own and how much debt you owe. 

2. Collect from Pending Invoices

Another tip that will prepare you for the new year is collecting from customers who have not paid yet. You’ve got to take care of all your uncleared transactions, unpaid bills, and unpaid invoices. You will need to put in some effort if you want to collect past due totals. But it’s worth it since you’ll have more working capital to expand your business in the coming year. 

Some customers just need a nudge, a bit of a reminder. Another copy of the invoice and a friendly email should do the trick. To make sure that everyone pays on time, you can set up invoice payment terms, contact customers who have past dues, and establish a payment plan or automatic payments from some vendors. However, you must be professional, positive, and understanding at all times. Otherwise, you will struggle to collect from late-paying customers.

If your customers or vendors are having trouble making payments on time, you should discuss a payment plan with them. It would enable them to pay in installments instead of leaving the entire balance unpaid. This allows you to prove to customers that you truly care about them and their requirements. But if you continue to have trouble after repeated attempts and letters, you’ll want to seek outside help, sometimes from a collection agency.

3. Inventory Accounting

Businesses that have inventory need to keep an accurate count of all the materials that are available on the premises or the warehouse. Otherwise, you’ll be dealing with inventory shortages or an unnecessary surplus.

Towards year-end, you need to conduct an inventory check or inventory count. You will have to use inventory tools, inventory management software or even hire out the service, and determine if there are any discrepancies between the balance sheet and the count.

When you account for inventory, you will determine how much money you have spent during the year on goods and supplies. Also, it enables you to find out how much money you will need for purchasing additional inventory going forward, and to adjust spending accordingly. 

4. Organize Business Receipts

When it comes to storing business receipts, make sure everything is organized. As the year ends, it makes sense to tidy things up and prepare for the new year. If your receipts are disorganized, your business will have a difficult time making sense of your transaction history or how to move forward with certain aspects of spending or product and service offerings. There will also be a risk of inaccurate and sloppy books leading to difficulties with taxes, the possibility of an audit, and poor decision-making. 

Here are some things that you can do to get all your business receipts in order.

• Use folders and labels
• Sort receipts by type of expense
• Organize all the receipts chronologically
• Store the receipts electronically on your computer

Keep in mind that it is easier to stay organized than to organize a mess. Maintaining order is better than trying to fix chaos. You should file a receipt the moment you get it. This will minimize the risk of omission. Now, if you have accounting software, it would even be possible to upload the receipt along with all relevant documents associated with the transaction. This way you have a permanent electronic copy or record of the transaction.

5. Reconcile Bank Accounts

When the accounting year ends, you need to reconcile all your bank accounts. This will allow you to verify whether your accounting records are accurate and updated. Review your bank statements to reconcile the accounts. It is necessary that your actual bank balance matches your books. This is also a good time to remind you to keep your business and personal expenses separate.

6. Review Your Accounts Receivable and Payable

In addition to the above, you also have to review your accounts receivable and payable so that you settle debts and collections. You need to follow up with vendors and pay them off so that the new year starts with a clean slate. Also, you must ensure that your accounts receivable reflects how much money your customers actually owe you.

7. Back Up Information

If there is one year-end booking tip that you simply cannot afford to overlook, it is to back up information. This will save you time and make things a whole lot easier for you when you need to access that data for yourself or the IRS.

You do not want to lose important information, as your company’s financial history and other details help you steer your business in the right direction. Having a reliable backup system, including a trusted cloud backup service, along with additional in-house physical storage like tape and hard drives, makes all the difference. Data back up isn’t an option; it’s a necessity, and one no good business owner neglects. 

8. Provide Documents to Your Bookkeeper

Lastly, you must have all important documents on hand so that you can give them to your bookkeeper. . Bookkeepers are great at keeping things organized. But if you’re still handling part of the bookkeeping process and aren’t as organized as they are, make sure to provide them will all necessary documentation so they can excel at their job.

Some of the documents that you will have to provide include sales records, invoices, petty cash records, bank statements, financial statements, loan information, and payroll records. If you are using software, it should take you just a few minutes to gather all the necessary documents. Talk with them beforehand to see what documents they need. 

In Closing

This should give you a solid start to your year-end bookkeeping checklist. It is important that you follow the steps mentioned above for a stress-free new year. Give your bookkeeper the info they need to help you succeed. And give yourself a break in the new year by starting off organized, up to date, and with clear goals for 2023. 

Sound Accounts helps small business owners get organized, make sense of their finances, and sharpen their business with individually tailored bookkeeping support plans and trusted advice. Connect with us today to get started and find out how to qualify for 6 months of free QuickBooks. 

To learn more about year-end bookkeeping preparations, check out our frequently asked questions below. And Happy New Year!

FAQ

What does a bookkeeper take care of at year’s end?

When the year ends, a bookkeeper has a lot of tasks that need to be performed. The professional will have to go through all your accounting records, perform necessary entries, complete bank reconciliations, and prepare financial statements. Moreover, they will also prepare your business for tax season.

How long will it take to prepare year-end accounts?

Preparing year-end accounts is often time-consuming. The larger your business, the more time it will take. It can take an entire month for an accountant or bookkeeper to complete the work. However, it can take even longer if you try to take on the work yourself. It is recommended that you hire a bookkeeper or bookkeeping service provider to help you manage your books. That way, you can focus instead on leading your team and your business operations.

Do bookkeepers handle invoicing?

Yes, bookkeepers can handle invoicing. They are experts in several roles. Therefore, you should have no trouble asking your bookkeeper to take on the invoicing and other tasks such as preparing financial statements and completing the bank reconciliations as well as preparing your tax returns, as long as all tasks are clearly communicated early on, written in a contract, and your bookkeeper is getting paid accordingly for their work.

What are some things I need to do as the new year approaches?

• Organize your receipts
• Back up your data
• Print and go over all your relevant financial statements
• Reconcile your bank accounts
• Do a full inventory count
• Collect all unpaid invoices
• Pay any invoices you still owe
• and more