The days are shorter and it’s not long now till we ring in a New Year.
If you’re an Accountant like me, you know it’s not long till many businesses have to prepare for year-end. The countdown is on!
(Behind on the bookkeeping for your business? Don’t despair: Read our 6 financial tips for getting caught up!)
It’s easy to focus on the day-to-day aspects of your business or make plans for your time outside of work, but it’s a lot less stressful to take time now to get ready to close your books.
Here is our checklist of 10 steps you can take now to prepare for year-end:
- Reconcile your bank accounts. Do your accounting records match all of your bank statements? It’s vital to compare deposits and expenses, fixing any errors and making adjustments so that what you have recorded is accurate. When you review bank statements (which we recommend you do every month), you might find some mistakes, which could be fraudulent activities. This is your chance to follow up and get things rectified.
- Review credit card statements. It’s important to check credit card statements to make sure you’re not being overcharged. Flag any suspicious charges and follow up with your credit card company.
- Double-check that earnings and expenses are recorded and coded properly. The more accurate your records are, the more reliable reports that you run will be. As we discussed in our last blog, keeping accurate and up-to-date accounting records is vital for every business.
- Review business loans. Do your loan balances match what’s recorded in the financial statements? Also check that interest has been recorded accurately.
- Collect past-due invoices. When was the last time you reached out to clients who owe you money? Make accounts receivable a priority right now.
- Double-check your accounts payable. Have you missed paying any of your vendors? Paying bills in a timely manner saves you from paying interest and creates a stronger relationship with your suppliers. We recommend asking for monthly statements from at least your main vendors to ensure that you have captured everything that you owe.
- Inventory counts, if applicable. An inventory count should be completed at least once per year (and ideally close to your year-end). Upon completion of the inventory count, someone must complete a reconciliation between the physical count and the system and post any adjustments into your accounting system. This ensures that the value of the inventory is accurate on your company balance sheet.
- Review your Balance Sheet for accuracy. Are your fixed assets recorded and classified correctly? Did you expense an asset purchased by mistake or did you sell an asset and forget to remove it from your fixed asset balance sheet accounts? By reviewing your Balance Sheet accounts, you can determine if items have been recorded properly or incorrectly. You should fully understand every balance that is sitting on your balance sheet and whether it truly should be recorded here or if it should actually be on your profit and loss statement.
- Review your Profit and Loss Statement. Once you feel fairly confident the Balance Sheet is accurate, you can run other reports, such as a Profit and Loss Statement (P&L). A P&L report shows the profitability of your business. Not only does it determine what revenue and costs are for a certain period, it also helps to forecast future sales and expenses.
- Make any necessary journal entries. Ensure that all of your journal entries are up to date and complete. For example, you may need to account for depreciation expenses or year-end payable accruals.
If you get through all of these steps and have time for one more, here’s our BONUS step for top-tier results:
- Evaluate your accounting processes. Are you confident you’re efficiently recording the information you need for your business and tax reporting requirements? Are you coding your revenues and expenses to the correct general ledger accounts? Are you receiving timely and accurate financial reports? It could be time to consider working with a virtual bookkeeper and/or a Virtual Chief Financial Officer (CFO). It’s also possible that you might decide that it’s time to update the accounting software you use.
Pro tip: Transitioning to a cloud-based accounting system or upgrading to a more recent version is easier than you think and very effective. We help businesses across Canada make the switch.
Curious to learn more about how our team helps clients keep accurate and up-to-date accounting records? Contact Finatics Accounting Solutions for a free consultation.