The year-end accounting checklist for small business owners
As the calendar year-end quickly approaches, your business fiscal year-end, or 12-month business cycle, may also be coming to a close. Even if it isn’t your Fiscal Year-End, this is still a good time to make sure your books are in order for the start of a new year.
This doesn’t just mean tax planning and getting your budget ready for next year. It also means getting your business in order for closing out your books.
Following is a checklist to guide you through this process.
1. Make sure your books are up to date and organized
This can be a relatively simple point if you followed the advice in our blog ‘How to Set up a Small Business Bookkeeping System’, and have been entering your receipts, invoices, and payments consistently. Consistently meaning on a daily, weekly, or monthly basis. With software being more user-friendly and typically cloud-based, this process has been simplified and can easily keep you up to date. Even if you have been staying on top of your books, it may still be worth a quick review.
If you haven’t been entering your receipts, invoices, or payments consistently, this is the time to get that done.
This is also a good time to review some of the less frequent expenses that your business may incur and make sure that they have been entered as well. This can include items that are pre-paid such as annual membership dues or insurance. Your business may also have other expenses such as legal fees that are even less frequent, that you need to ensure have been included.
Finally, you may have interest statements from investments that your business has made. You will want to make sure those are in order for your accountant or bookkeeper as well.
2. Reconcile your bank statements
Whether you keep track of your books online or on paper, you need to ensure that they match up with what your business’s bank and credit card statements say. Again, with some of the newer software programs on the market, this may be quite easy for you as the program will keep track of this. If you don’t have a program that does this for you automatically, you should be reconciling them on a monthly basis.
Either way, now is the time to ensure that everything matches up.
3. Review your financial statements
This is a good time to take a look at your income statement and balance sheet to make sure that things look correct, or as they should. If something doesn’t seem right, it’s obviously worth a closer look.
More specifically, your income statement will show you your business’s revenue earned and the expenses that were incurred, while your balance sheet will show you your assets, liabilities, and the equity in your business.
One of the things to look for, is whether the balances are significantly higher or lower than you had expected. Other things to look for include an unexpected negative balance or any unexpected extreme differences from previous years.
There are likely going to be some differences, especially if your company is growing as you planned, but it is always worth double-checking your balance sheet and income statements.
If you are using a new bookkeeper or accountant this year, they may also request your prior year’s records for reference and a place to start, as well as so that they can keep an eye out for any unusual changes.
4. Accounts receivable
As a business owner, you likely stay on top of your invoicing and receivables. Even if you do, this is still a good time to review where your accounts receivables are at, and your invoices. This includes re-visiting any invoices that have yet to be paid, confirming whether or not they are still incoming or if they simply weren’t entered as of yet.
This is also the time to review any outstanding invoices that are past due 60 days, and to consider if the business should be writing them off. Bad debt needs to be noted and accounted for, so that it can be recognized at tax time.
5. Accounts payable
Now is also a good time to check your accounts payable. This will also be easier if you have been staying on top of your record-keeping, or you have a bit of work ahead of you. Either way, you will need to know if your payables are getting close to being due so that you don’t have any late payment charges. You may also decide to pay your bills early if you want that reflected in this year’s taxes.
If you have been entering all of your payables and receivables into a software program, checking them can be fairly simple. You can simply run an aged receivables or aged payables report which will confirm where you are at.
6. Inventory
If your business carries an inventory, you will need to perform an inventory count for year-end. This is done by physically counting the inventory so that you know what you have and its value at year-end. Depending on how much inventory your business has, this may be a simple task or one that takes a great deal of time and staff. Make sure you plan accordingly so you don’t run out of time.
7. Review your deductions and changes to your business
The Canada Revenue Agency may change what can and cannot be used as deductions, or they may change the amount that can be deducted. This is a good time to check with your bookkeeper or accountant to see what can be deducted and gather any necessary documentation for them.
If during the last year your business has taken on any new components or services, this is also the time that you will need to check with your bookkeeper or accountant to find you what documentation you will need to provide them with.
Finally, you will need to find paperwork regarding any new equipment or other significant purchases that you have made this year so that your accountant or bookkeeper can add them to your assets accordingly. Likewise, if you sold any equipment or other assets in the last year, you will need to let them know so that it can be written off of the books.
8. Plan your taxes
It is always best to review your financial statements quarterly, including your income statement and balance sheet, so that you are aware of how your business is doing, and to help you plan short and long-term. Even if you haven’t been doing that, ahead of your company year-end is a good idea to meet with your accountant to review all of your year-to-date financial statements.
It is always better to prevent any surprises at tax time, that could be avoided with this review. For example, your bookkeeper or accountant can let you know if you should be making equipment or inventory purchases now instead of early next year, in order to help reduce your tax bill. Or this may be the time to possibly re-evaluate your business structure.
9. Reflect on the year
Now is a good time to look at the last year and reflect on how it went. This applies to your entire business, especially now that you’ve had the chance to evaluate this year’s financial statements. This is the time to evaluate if you met this year’s goals, if they were realistic or if they need to be adjusted for next year. This leads to our last point-
10. Set your goals for next year
Once you’ve taken a look at this last year and evaluated how it went for your business, now is the time to look to next year and plan for the year ahead. Whether this be a possible change of direction, growth, purchasing new equipment or tax planning, this is a great time so start your planning.
As a parting thought- remember it’s best to tackle this checklist sooner than later. Your year-end may approach quicker than expected, and your bookkeeper or accountant is going to need time on their end to complete your books for year-end. You certainly don’t want to be stuck paying any late interest charges.
Need help from an expert?
We understand that some of this may be more than you want to take on at year-end. Let one of our experts at Valley Business Centre help. For over 30 years, Valley Business Centre has been providing comprehensive bookkeeping, payroll, and tax services to our clients in Whistler, Squamish, the Sea to Sky Corridor, and metro Vancouver B.C. areas. Valley Business Centre provides reliable and effective services to all clients.
Disclaimer
This article is written for informational purposes only. It is current at the date of posting and changes to laws and regulations may result in the information becoming outdated. It is not intended to provide legal, tax, or financial advice. It is recommended that readers get advice from a tax professional before making any final decisions.
