Year-End Accounting in 6 Steps
May we all be as happy-go-lucky as these guys when our year end accounting is done.
Have you finished your year-end accounting? If not, better late than never! Here are the important year end accounting tasks you can do to close out your books and get started on a fresh new year. Bonus: we’re including tips to make next year’s year-end accounting even easier!
STEP 1: Get Paid
Make sure all your invoices are created, sent out, and paid for work done this year. Reach out to clients and customers with outstanding invoices. Talk to your accountant if someone cannot or will not pay their bill. Record all payments and invoices in your accounting software.
Make next year easier: Send out invoices promptly. Put the payment terms in writing on your invoice and have clients sign a contract that they agree to the terms. Send regular email reminders before payment is due. Start your year end accounting in early December so you have the month to pursue outstanding payments.
STEP 2: Pay What You Owe
Time to apply the golden rule. Pay any vendors and contractors you owe money to. Any outstanding bills for the year should be paid off as well. Make sure all your employees are paid up for the year, and give out any bonuses, setting aside proper withholding tax.
Make next year easier: Pay your bills right away and run payroll on time. If you have to wait to pay invoices, set reminders in your calendar for the due date. Paying bills right away not only saves you a headache, it gives you a good reputation in your industry and may qualify you for discounts with some vendors.
STEP 3: Finalize Expenses
Make sure all your expenses throughout the year are recorded in your bookkeeping software. Check that they are all properly categorized. Comb through your personal bank accounts as well to make sure nothing business-related slipped in, and vice-versa. Purchased anything that will last longer than a year? Talk to your accountant about whether this should be marked as a fixed asset. You may also want to talk to your accountant or CPA and see if they advise making any purchases before the end of the year to reduce your taxable income.
Make next year easier: Make sure you have separate personal and business bank accounts. Be careful to use the company card when making business purchases, and don’t use it for personal items. The IRS does not like to see personal and business expenses mixed together. That’s a red flag.
STEP 4: Reconcile
Hopefully you are blessed with an excellent accountant or bookkeeper who can do this for you. If not, you can easily find walkthroughs and how-to’s for the bookkeeping software you use. Basically you want the income and expenses in your accounting program to match what shows in your bank statements.
Make next year easier: Reconcile your bank accounts every single month. Seriously. No excuses.
STEP 5: Tax Prep
These year end accounting tasks will make tax season less of a headache. Figure out your mileage for the year. If you don’t drive much for your business and haven’t been keeping track, you may be able to check your phone’s location history to get an idea. Run depreciation for your fixed assets. Your software should be able to do this for you, or your accountant can. Make sure your payroll tax liabilities match your quarterly payroll returns. Verify employee and contractor information so you’re ready to send out W2s and 1099s. And do a final inventory count on the last day of your fiscal year.
Make next year easier: Keep a post-it in your car to write odometer readings each month. Send an email out in November to all employees and contractors to check for changes to their information you have on file.
STEP 6: Wrap it Up
Now it’s time to run your reports for the year:
Profit & Loss report (or Income Statement)
Balance Sheet
Statement of Cashflows
Expense Report
Income Report
Payroll Summary
Sales Tax Summary
Have these saved and accessible for your accountant or tax pro.
Next, create a company file with your accounting software. You want to backup the year’s data and store it somewhere secure and accessible.
And you’re done! Close your books or set a lock date. Time for a brand new year! And you’re now ready to make small steps each month to make the year end accounting process faster and easier.
The best hack for easy year-end accounting?
Go with an accounting group dedicated to making the year-end accounting process pain-free. Pioneer Accounting Group stays on top of daily, weekly, monthly, and yearly tasks so you can focus on the fun stuff. Start a live chat or get in touch today to discuss how we can help you this year.