As the year draws to a close, it’s time to think about your business finances. Whether you’re a seasoned entrepreneur or just getting started, year-end accounting is essential for closing out the current year and setting your business up for success in the new one. While it may seem like a daunting task, breaking it down into manageable steps can make it a lot easier.
Here’s a quick and easy guide to help you wrap up your books and ensure you start the new year on the right foot.
- Reconcile Your Accounts
Reconciling your accounts may not be the most exciting task, but it’s one of the most important. Take time to review your bank, credit card, and payment platform statements, and ensure they match your records. This is a small task that can save you a lot of time and stress down the road. Any discrepancies should be resolved now, so you don’t encounter surprises when it’s time to file taxes.
Tip: Most accounting software has a built-in reconciliation feature that makes this process even easier. By staying on top of this, you can identify potential issues before they become bigger problems.
- Organize Your Transactions
If your financial records are cluttered, now’s the time to clean them up. Go through your income and expense records and categorize everything properly. Make sure each transaction is assigned to the correct category—whether it’s office supplies, marketing, payroll, or any other expense. The goal is to ensure everything is accurately classified for tax purposes and future reference.
Why it matters: Proper categorization will save you a huge headache when it’s time to file taxes or review your financials. The last thing you want is to spend extra hours hunting down receipts or trying to figure out where each transaction belongs.
- Check on Unpaid Invoices and Bills
Cash flow is the lifeblood of your business, and unpaid invoices can severely affect it. As the year ends, take the time to follow up on any outstanding invoices. Contact your clients or customers about overdue payments and get your cash flow back on track.
At the same time, make sure you pay any outstanding bills. Being proactive about this will keep your relationships with vendors in good standing and help you start the new year debt-free.
Pro Tip: Set a reminder to check in on invoices monthly to avoid a backlog. This will make year-end collections far easier and less stressful.
- Run Your Key Financial Reports
To get a full picture of how your business performed this year, it’s essential to generate and review key financial reports, including your:
- Profit & Loss (P&L): This will show you whether your business was profitable, outlining your income and expenses over the year.
- Balance Sheet: This will give you a snapshot of your assets, liabilities, and equity.
- Cash Flow Statement: This report shows how money moved in and out of your business, which is crucial for understanding your liquidity and cash flow health.
Reviewing these reports will help you identify trends, spot potential problems, and make more informed decisions going into the new year.
- Get Your Receipts in Order
If you’ve kept all your receipts throughout the year, congratulations! Now, it’s time to organize them. Gather all your receipts, scan them, and upload them to a cloud storage service. This way, you can access them anytime, and they’ll be ready when you need to send them to your tax professional.
If you haven’t been as diligent about keeping your receipts, try to go through your records now and gather whatever you can. Even if some receipts are missing, your accounting software can often fill in gaps, but the more you have, the better.
- Backup Your Data
While this one might not be top of mind for everyone, ensuring that your accounting data is backed up is essential. If something goes wrong with your software, having a backup ensures that your financial information is safe. Most cloud-based accounting systems have built-in backups, but it doesn’t hurt to double-check.
- Set Financial Goals for the New Year
Once you’ve wrapped up the past year, take a moment to set financial goals for the year ahead. Whether it’s increasing revenue, reducing expenses, or investing in new projects, setting clear, measurable goals will give you something to work towards and help keep your business on track.
Tip: Use the insights from your financial reports to make these goals more specific and realistic. A well-informed strategy will lead to better outcomes.
Need Help With Year-End Accounting? We’ve Got You Covered!
Year-end accounting doesn’t have to be a stressful experience. By staying organized and taking care of these tasks in small chunks, you’ll set yourself up for a smooth transition into the new year. And if all of this seems like too much to handle on your own, don’t worry—we’re here to help.
Reach out to us today, and we’ll take care of the details for you. Trust us—you’ll be glad you did! With a little effort now, you can avoid stress later and start the new year with a clean slate.
Let’s finish the year strong!