- Prepare a closing schedule. …
- Gather outstanding invoices & receipts. …
- Review asset accounts. …
- Reconcile all transactions. …
- Close out accounts receivable and payable. …
- Accrue accounts receivable. …
- Accrue accounts payable. …
- Adjust grants and entitlements.
Business owners must close out their books as 2020 draws to a close in order to file their taxes and forecast the health of their company. An accounting year end checklist was produced by Consultance Accounting to assist you with this challenging process. This Accounting End of Year Checklist for Businesses can be useful whether your company employs an accounting specialist, outsources accounting, or handles the majority of the bookkeeping in-house.
Checklist For Steps Involved In Month-End and Year-End Closing Of Accounts
Why create an accounting year end checklist?
Using an accounting year-end checklist can help you keep track of all the things you need to do before the start of the following fiscal year. It might be easier to remember the items if you write them down by hand or enter them into a checklist app. When an item on the list is finished, you can delete it or mark it as completed. It may be helpful to decide what to delegate or prioritize by looking at the tasks that still need to be completed at a certain time.
13 items to include on an accounting year end checklist
To get ready for the upcoming fiscal year, think about including these 13 items on your accounting year-end checklist:
1. Save your documents
Save all of your important documents, both physical and digital, throughout the year in anticipation of the end of the fiscal year. Think about printing virtual statements for tangible files and scanning paper statements to store them virtually as backup documents for both types. Documents to save may include:
2. Organize your books
Evaluate your books to ensure the accuracy of all information. If you’ve maintained orderly records all year, the procedure might be straightforward. You can make sure all the numbers make sense given their context by checking them. For instance, it would make sense for a rent payment to be more than $50 and closer to $10,000. You can also resolve any duplicate or missing entries by comparing the data in your records to all of your credit card and bank statements. If you performed a lot of transactions during a fiscal year, you might want to hire a bookkeeper or an accountant to assist you with this task.
3. Prepare important documents
Prepare the materials that will enable you to finish the other items on your checklist. These may include:
A balance sheet provides a summary of a company’s financial condition over a certain time period. It includes information on assets, liabilities and equity. Liabilities and equity combined must equal assets in order for the account to be in balance.
A profit-and-loss statement, also known as an income statement, breaks down revenues and costs for a certain time period. This document can demonstrate whether a company is profitable by analyzing its revenue, tax costs, cost of goods sold, depreciation, and operating costs. By examining the correlation between gains and losses, an income statement may also assist a company in determining its bottom line.
An organization’s cash inflow and outflow for its operating, investing, and financial activities over a given time period are summarized in a cash flow statement. It can demonstrate how much money enters and leaves a company. Additionally, it can indicate whether a company’s cash flow is positive and that revenues outpace expenses. This document can aid in predicting a company’s future cash flow.
4. Review accounts payable and accounts receivable
Check your accounts payable and receivable to make sure all collections and debts have been paid. Check accounts receivable for any missing invoices, and get in touch with any clients who have late or unpaid bills. Address any late bills in accounts payable and contact vendors about uncashed checks.
5. Review vendor and lender paperwork
Verify the accuracy of the information on your 1099 forms by doing so. To ask questions or to check the accuracy of the information provided, get in touch with the lenders and vendors. Verify the forms’ accuracy by comparing them to your automated billing or payment system. This could simplify your payment procedures in the upcoming year.
6. Examine your business financial state
Use the documents and data you’ve gathered to calculate the company’s profit margin, current ratio, and total debt ratio to get a broad sense of its financial situation. This might be useful to you as you prepare for the upcoming fiscal year.
7. Take inventory
Assess your current inventory and compare the findings to your previous inventory report. Make the necessary changes to accurately reflect the capital of your current inventory. You might also think about conducting an inventory analysis on items like office supplies and equipment that you don’t sell. Look for items to repair or replace. These can be included in your budget for the following year.
8. Compare your budget to your outcomes
Compare the actual financial results to the budget you created at the end of the previous year. Search for areas where you went over budget and areas where you saved money. Utilize this data to better reflect your operations’ actual spending in the upcoming budget.
9. Evaluate this years goals
Review a list of your personal and professional objectives for the coming year. View the ones you achieved and the ones you still need to complete. Decide which goals carry into the next fiscal year.
10. Set next years goals
Consider making a list of new business and financial goals to aid in your planning for the upcoming year, in addition to any current-year goals that will carry over into the following one. The SMART method can assist you in creating objectives that are:
To make your goals more attainable, think about making them more specific rather than general. For instance, instead of stating that you want to increase sales next year, explain how you plan to do it or specify which products you want to sell more of. The objective might be to sell more date planners than last year.
Choose goals you can measure with data. Include criteria like how much of something you want to sell or how much you want it to increase your profit margin instead of setting the goal of making more sales. A measurable objective might read: Sell 100 more date planners this year than last.
Pick objectives you can achieve given your capacity for production, inventory, and staffing. For instance, if there are only two people working on the production line, you shouldn’t set a goal to make and distribute one million date planners in six months. Instead, you might decide to start by establishing short-term objectives to increase staff numbers or buy an automated production system in order to move closer to the long-term production objective.
Consider setting relevant industry and customer goals. To coincide with back-to-school season, an office supply company, for instance, might set a third quarter goal to sell more planners.
Set goals that are time-sensitive. This can apply to short-, mid- and long-term goals. A goal that has a time-sensitive component is easier to prioritize in a long list and creates a sense of urgency for making plans to complete it as soon as possible rather than later.
11. Create next years budget
Utilize the financial records and this year’s budget to help you create the next year’s budget. Based on your prior data, make the necessary adjustments and check that your budget and goals are in line. If necessary, alter your objectives or your spending plan. To more accurately assess needs like cash flow or track expenses, think about dividing the budget into smaller timeframes, like monthly. It might also assist you in identifying the time-sensitive component of your SMART objectives. Make sure the budget balances as well.
12. Evaluate your tax strategies
See if you can save money by researching tax strategies while looking at your current tax rate and brackets. Making purchases at the beginning of the year before the end of the current fiscal year or, if possible, delaying invoices are a couple of strategies. You might be able to increase expenses and decrease taxable income by using certain tax planning techniques. Think about speaking with a tax attorney to receive personalized guidance for your business.
13. Prepare your payroll and tax documents
Prepare your payroll and tax documents for you and your employees in order to finish the fiscal year. Verify that benefits like health and life insurance, educational reimbursements, transportation subsidies, and related payouts are listed for companies that issue W-2s. Look for withholdings like deferred compensation, fringe benefits, and end-of-year bonuses on payroll documents. To ensure documents are properly prepared, think about speaking with an accountant or using an online payroll and tax software.
FAQ
What should be included in end of year accounts?
- Gather and analyze financial statements. …
- Collect past due invoices. …
- Account for inventory. …
- Organize business receipts. …
- Reconcile bank accounts and credit cards. …
- Review accounts payable and receivable. …
- Back up information. …
- Get necessary documents ready for your accountant, if applicable.
What is year end closing process in accounting?
This should consist of all sales and purchase receipts, checkbooks, and recent bank statements. In addition, list your outstanding debtors at year-end. List all sales that haven’t been paid for in order to do that, and if you have a good feeling that an invoice won’t be paid, mark it as a potential bad debt.
What are the 4 steps in the closing process?
The process by which businesses review and update their accounting records (also known as “the books”) at the end of the fiscal year is known as year-end closing. The process for the company’s annual financial reporting ends with this crucial step.
