How to Prep Your Books for Year End
As the calendar year wraps up, it’s the perfect time to make sure your financial records are accurate, organized, and ready for tax season. Year-end bookkeeping not only helps you stay compliant but also gives you a clear picture of your business’s performance and financial health.
Here’s a straightforward guide to help you get your books in shape before the year ends.
1. Reconcile Your Accounts
Start by reconciling all your financial accounts including bank, credit card, and loan statements. Make sure every transaction matches what’s in your accounting software or ledger. This helps identify any missing entries, duplicate charges, or bank errors that could throw off your numbers.
Pro Tip: Don’t forget to reconcile smaller accounts like PayPal or petty cash.
2. Review Outstanding Invoices and Bills
Take a close look at your accounts receivable and accounts payable.
Follow up on any unpaid invoices to improve cash flow.
Pay outstanding vendor bills or record them accurately for year-end reporting.
Keeping these lists current ensures your financial reports reflect your true income and expenses.
3. Verify Payroll and Contractor Information
Check that all payroll records are complete and accurate.
Confirm that employee names, addresses, and Social Security numbers are correct, and that all wages, bonuses, and withholdings are properly recorded. If you’ve paid independent contractors during the year, make sure you have W-9 forms and prepare for issuing 1099s if applicable.
4. Update Your Fixed Assets and Depreciation
Review your list of fixed assets such as equipment, vehicles, or office furniture.
Add any new purchases, note any disposals, and ensure your depreciation schedule is up to date. Accurate asset tracking helps with tax deductions and long-term financial planning.
5. Organize Receipts and Supporting Documents
Ensure you have documentation for all major transactions, including receipts for deductible expenses, equipment purchases, and travel costs. Staying organized makes tax filing easier and provides peace of mind if you ever need to verify your records.
Pro Tip: Digital recordkeeping tools or cloud storage can make organizing and accessing these files much easier.
6. Review Financial Reports
Generate your key financial statements Profit & Loss, Balance Sheet, and Cash Flow Statement and review them carefully. Look for unusual transactions, missing data, or inconsistencies. These reports give you insight into your business’s performance and help identify opportunities for improvement.
7. Plan for the New Year
Once your books are in order, take a moment to reflect on what your numbers are telling you. Consider setting financial goals, updating your budget, or adjusting your pricing or spending strategies for the coming year.
A clear financial picture helps you make informed decisions and start the next year strong.
Final Thoughts
Year-end bookkeeping doesn’t have to be overwhelming. By taking the time to review your records, reconcile accounts, and organize documentation, you can simplify tax preparation and set your business up for success in the year ahead.
A little preparation now can save a lot of stress later and give you confidence knowing your books are accurate and complete.