Is there anything I should do at the end of the year to wrap up my bookkeeping in preparation of tax season?

As year-end approaches, many businesses focus on closing the books and preparing financials for tax season. Wrapping up bookkeeping to-do items is essential to ensure financial clarity, meet compliance requirements, and make informed business decisions going into the new year. Here are the key steps to finalize your year-end bookkeeping effectively.

1. Organize All Financial Documents

Before diving into specific tasks, gather all financial documents, including invoices, receipts, bank statements, credit card statements, and payroll records. Organizing your records minimizes errors and helps ensure you don’t overlook important transactions. Consider scanning paper documents into a digital system for easier tracking and storage, and organize files by category or month. Adding copies of invoices and receipts directly to transactions in your accounting system is a great way to keep track of these items.

2. Reconcile Bank and Credit Card Accounts

Bank and credit card reconciliations are crucial for verifying that the transactions recorded in your accounting system match the actual transactions on your bank and credit card statements. Go through each account carefully, identify discrepancies, and resolve them. This process helps detect errors, identify missing expenses, and ensure you have accurate balances for year-end reporting. You may also want to go one step further and reconcile items on your balance sheet such as loans, payroll liabilities, and benefit accounts.

3. Review Accounts Receivable and Accounts Payable

Take a close look at both accounts receivable (AR) and accounts payable (AP). For AR, verify that all outstanding invoices have been collected, and follow up on overdue payments. Unpaid invoices can impact cash flow, so take steps to collect on these before year-end if possible. For AP, ensure that you have accounted for all outstanding expenses and have cleared as many as possible to provide a true picture of your cash flow and profitability.

4. Update Fixed Assets and Depreciation Schedules

Fixed assets such as machinery, office equipment, and company vehicles should be reviewed and recorded. Update your fixed asset register to include any additions or disposals that took place during the year. Adjust depreciation schedules accordingly, as these affect your tax deductions. Depreciation is typically calculated annually, and updating these records ensures that your financial statements reflect accurate asset values.

5. Adjust for Prepaid Expenses and Accrued Liabilities

If your business has prepaid expenses (e.g., insurance or rent paid in advance) or accrued liabilities (e.g., wages payable or interest), make adjustments accordingly. Prepaid expenses should be recorded as assets and expensed over time, while accrued liabilities should reflect expenses incurred but not yet paid. Properly adjusting for these ensures that your financial statements accurately represent your business’s financial position.

6. Run Financial Statements and Review for Accuracy

Once adjustments are made, generate your main financial statements: the profit and loss statement, balance sheet, and cash flow statement. Carefully review these reports for accuracy and completeness. Look for any irregularities, such as unusually high or low expenses, unexpected losses, or discrepancies in account balances. Reviewing your financials at year-end offers valuable insight and allows you to address any potential issues before tax season.

7. Review Your Tax Obligations

Year-end is also the time to prepare for tax filing. Consult with a tax professional if necessary to ensure you’re aware of your tax obligations. Review expenses to identify potential deductions, ensure payroll taxes have been calculated correctly, and consider any last-minute tax planning strategies, such as purchasing equipment or making charitable donations, to maximize your tax benefits.

8. Review Contractors for 1099s

This is a great time to go through your list of contractors to make sure you have W9s on file for each. You do not need W9s for S-Corps and Incorporated (Inc) businesses, only sole proprietor and LLCs filing as undesignated. Most accounting systems will track payments to contractors if you add the W9 information to the vendor/customer profile. This way, at the beginning of the year, you can have your accounting system produce the 1099s for you to send electronically or by mail.

9. Set Goals for the New Year

With your financials in order, it’s a good opportunity to set goals for the upcoming year. Use insights from your financial reports to identify areas for growth or improvement, such as increasing profitability, reducing expenses, or enhancing cash flow. Setting these goals now helps you start the year with a clear financial roadmap.

By wrapping up these essential bookkeeping tasks before year-end, you’ll have accurate financial records, simplify tax preparation, and set your business up for a successful new year.

This Q&A does not constitute legal, accounting, or tax advice and

does not address state or local law.

April Salsbury

April Salsbury, MBA is a strategist, an analyst, an operational guru, a recognized leader and C-suite global healthcare executive with drive and focus for competitive markets. Co-host of The Business Forum Show and regular contributor to various business journals, she possess multi-functional and multi-national competencies with more than 15 years experience in business and healthcare. Her expertise is in invigorating revenue growth and infusing value of lean practices in growing companies through improvements to cash flow and operations management.

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