Year-end accounting is crucial for your small business’s planning and budgeting for the following year. Being in the midst of the holiday season is crazy enough for small business owners. Not only are you trying to balance your work and your personal life, but business is probably booming! This means business is taking up more of your time and resources. Don’t let year-end sneak up on you! Ensure you are prepared for a successful 2022 by knowing these 5 year-end accounting tasks.
- Run and Analyze Reports/Statements: However you manage your business’s books, whether it be on your own or with the help of an accounting service, running annual reports and statements will give you an overall picture of how your business is financially compared to previous years. These reports also give you insight as to where your company stands going into a new year, allowing you to make important finance plans and decisions. Consider setting up a meeting with the My Accountant Bookkeeping & Tax Service Inc team to get the following reports and additional insight:
- Cash Flow Statement: A cash flow statement enables you to see what money has come into the business versus what money has come out and where it has gone. It is important to review this periodically throughout the year—for example quarterly—to ensure you are not spending more than you are making. However, it is also important to run the statement from the start to the end of a year. If you are losing money, you will be able to determine exactly where it is going and create a plan to adjust accordingly. You can also compare your current cash flow standings to previous years.
- Balance Sheet: A balance sheet report for a small business is another type of financial report which will lay out all of your business’s assets against liabilities. This is another way to ensure your business is making good financial decisions and is in the positive. Updating your balance sheet frequently allows you to compare and see important financial trends in your business.
- Examples of assets listed could be money the business has in the bank or inventory on hand.
- Examples of liabilities can include loans/debt, or accounts payable (money owed to other parties).
- Income Statement: Although an income statement is similar to a cash flow statement, it is an important report to have as well. The cash flow statement focuses specifically on the movement of money whereas the income statement shows the business’s overall revenues or expenses. Things that don’t have a specific cash value are taken into consideration such as depreciation.
- Review Accounts Receivable: Accounts receivable is a list of unpaid invoices or money owed to your business for providing a service. An example of a business with many unpaid invoices can be a dentist or doctors office. Clients come in and get services done which are preformed by the doctor and are later billed. Reviewing your accounts receivable on a regular basis can ensure you are getting paid in a timely manner and also allows you to follow up with clients who still have an outstanding invoice.
- Although your invoices should be monitored regularly throughout the course of the year, at year-end it is always a good idea to tie up as many loose ends as possible. If you notice many invoices are being left unpaid, you can also come up with a new procedure for the following year to ensure you have a higher paid ratio.
- Review Contracts and Vendors: As you wrap up one year and get ready to start a new one, there is no better time to review the vendors and third parties you associate with. After reviewing your financial reports you can see how your business is doing and if/where you need to make financial adjustments. Shopping around for different vendors with affordable pricing can help your business save money. Review any contracts you have and see if you can find a better fit for when your contract is up. For example, you may roped into a one or two year contract with an internet or phone provider. See when you can switch without penalty and start browsing the competition. If you are happy with all of your third party partners and contracts, then ensure all of their contact information is up to date and readily available.
- Verify Payroll: As the year is wrapping up it is important to ensure all of your employees’ payroll information is up to date and that there are no discrepancies regarding their pay or tax elections. It is required by law to send out an employee’s pay information for taxes by the end of January. This is typically a W2 or 1099.
- If you have payroll services through your accountant, then you can reach out to them to receive year end payroll reports and forms. Providing any staff you have with tax election and withholding papers is a good practice in case they wish to make changes for the upcoming year. You can also view data to determine how much money was spent in wages or taxes individually and overall for your staff.
- Gather Tax Documentation: Tax time is typically followed by stress and anxiety. Rather than waiting until your appointment with your accountant to file your return before the deadline, it is a good idea to setup a meeting to prep your return in advance. Although you will need many documents that aren’t available until early the next year, you can still get organized with the paperwork you do have. Most of which includes the financial reports and payroll information listed previously.
- Tax season usually means many clients wish to meet with their accountants. To ensure you get to meet with your accountant at a time and day that works best for you, it is best to schedule your appointment early.
Knowing where your company stands financially is imperative to running a successful business that continues to grow year over year. Staying organized throughout the year and meeting regularly with your accountant will allow you to easily accomplish these tasks above. Completing these year-end “to-do’s” will ensure you can meet your business’s physical and financial goals for 2022 and future years to come.