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As the year draws to a close, business owners often focus on finalizing projects, evaluating annual goals, and planning for the upcoming year. Yet, one crucial aspect of year-end preparation frequently goes unnoticed: reviewing and organizing your financial records. Proper year-end bookkeeping is essential to ensure your finances are accurate, taxes are manageable, and your business is set up for success in the coming year.
With over 7 years of experience, I know that taking your time to review your bookkeeping checklist before year-end can make a significant difference for your business. In this blog, we’ll walk you through five critical bookkeeping checks every business should complete before the end of the year. Partnering with a professional bookkeeper can make these tasks easier and more efficient, allowing you to focus on planning growth for the next year.
Also, read: Why is Bookkeeping Important for Small Businesses
1. Verify All Transactions Are Recorded and Categorized Correctly
Throughout the year, it’s easy for some transactions to go unrecorded or be miscategorized. These small errors can add up, leading to inaccurate financial statements and potential tax issues. Before year-end, it’s essential to review all transactions and ensure they’re recorded correctly in your accounting system.
Accurate categorization is especially important for tax purposes, as different types of expenses may be deductible in different ways. For instance, office supplies and business meals might both be deductible, but they belong in separate categories and may have distinct rules regarding deductibility. Ensuring that all transactions are categorized correctly also makes it easier to analyze your business’s financial performance.
A bookkeeper can review all your transactions, correct any misclassifications, and ensure that your financial records are complete and accurate. Their expertise helps you avoid errors that could impact your tax filing and provide a clearer picture of your business’s financial health.
2. Review All Accounts Receivable and Payable for Accuracy
Accounts receivable (AR) and accounts payable (AP) are two crucial areas to review before year-end. Examining AR provides a clear picture of outstanding invoices, enabling you to follow up on overdue payments and bring in revenue before the year ends. Reviewing AP helps you ensure that all expenses are accounted for and that you’re aware of any payments due soon.
This review allows you to spot discrepancies, such as unpaid invoices or duplicate bills, which can impact cash flow. Additionally, understanding your AR and AP at year-end makes tax planning easier, as you’ll have a clear view of your income and expenses.
A bookkeeper can conduct a thorough review of your AR and AP, identify overdue invoices, and confirm that all expenses are recorded accurately. They’ll also help reconcile any discrepancies, giving you a clear view of your cash flow and up-to-date financial records.
3. Reconcile Bank Accounts, Credit Cards, and Loans
Reconciling your bank accounts, credit cards, and loans is essential to ensure that your recorded transactions match the actual balances in your financial accounts. Discrepancies between your records and bank statements could indicate issues like duplicate entries, missing transactions, or even fraudulent charges.
Year-end reconciliation provides peace of mind that your financial statements are accurate and that you’re well-prepared for tax season. Additionally, reconciling loan balances allows you to verify the amount of interest paid over the year, which may be deductible, and ensures that your liabilities are accurately represented.
A bookkeeper can handle the reconciliation process for you, comparing your bank, credit card, and loan accounts against your accounting records. They’ll resolve any discrepancies, delivering accurate financial statements and reducing the risk of errors that could impact your tax filings.
4. Take Inventory Count and Adjust Records for Discrepancies
If your business holds inventory, conducting an end-of-year inventory count is essential. An accurate inventory count helps you identify discrepancies between your physical stock and recorded inventory levels. Issues like theft, damage, and miscounts can all affect your inventory records and, ultimately, your cost of goods sold (COGS).
Reconciling your physical inventory with your records ensures that your COGS is accurate, which is critical for calculating gross profit. An accurate inventory count also aids in making informed decisions about stock levels, product ordering, and potential write-offs for unsellable items.
A bookkeeper can assist you with conducting an inventory count and adjusting your records to reflect the actual inventory on hand. They’ll ensure any discrepancies are recorded accurately, providing a true picture of your COGS and inventory levels.
5. Prepare Preliminary Financial Statements for Review and Adjustment
At year-end, preparing preliminary financial statements, including the Profit and Loss Statement, Balance Sheet, and Cash Flow Statement, is essential for understanding your business’s performance. These reports provide insights into revenue, expenses, assets, and liabilities, giving you a complete picture of your financial health.
Preliminary statements allow you to review your financial performance, identify any final adjustments needed, and plan for taxes. This review is also an opportunity to discuss your business’s financial goals for the coming year and make informed decisions about budgeting and cash flow.
A bookkeeper can prepare and review your preliminary financial statements, ensuring they’re accurate and up-to-date. They’ll help you identify any final adjustments and provide insights into your business’s performance, helping you start the new year with a clear financial strategy.
Also, read: Financial Planning for Seasonal Businesses in Canada: Tips and Strategies
Back To You
Year-end bookkeeping can be a daunting task, but it’s a vital part of maintaining accurate financial records and preparing for tax season. When you have a bookkeeping checklist in hand and complete these critical tasks, it becomes much easier to ensure your books are in order, your financial statements are accurate, and your business is ready to move forward confidently.
To make your year-end bookkeeping seamless and stress-free, consider partnering with a professional. Great Start Bookkeeping is here to assist with all your bookkeeping needs, from transaction review to financial statement preparation. Let us help you enter the new year with confidence and clarity. Contact us today to learn how we can support your business’s growth and financial success.
