Small Business Year-End Checklist

Category: Jobsite | By ClockShark | 4 minute read | Updated Jan 11, 2018
Small Business Year-End Checklist

It’s the most wonderful time of the year! And that means it’s also the most tedious time – it’s Year-End!

What’s all the fuss about? Why do we worry about the end of the year? There are a few reasons:

First of all, you have to file a tax return. The IRS demands it. In order to do that, you need all of your numbers to be accurate and up to date.

Second, and maybe more important to you, you need to measure your success. How were your sales this year? Did you surpass last year? How much profit did you make? If you don’t have all of your end-of-year tasks completed, you can’t answer those questions.

Aside from taxes and this year’s success, you need to plan for next year. How can you build a budget if you don’t have a measuring stick? Year-end procedures can help you find your way. What worked last year? What didn’t work? These are important questions that demand answers if you want to accomplish goals.

Year-End Checklist

What should you do to make sure that you’ve accomplished all the cleanup and wrap-up tasks you need for the year-end? Here’s a checklist of some things:

1. Reconcile all accounts

Why do this? If everything comes in from the bank feed, it’s all there. Right? Maybe. Banks do make mistakes, believe it or not. When you reconcile your accounts, you make sure that everything in your books matches everything that happened in your bank or credit card accounts. If you miss an expense, your bottom line will be higher, resulting in higher tax liability. Do you want to pay MORE taxes? I didn’t think so. If you inadvertently duplicate some expenses, then your bottom line is erroneously lowered. That could result in penalties and interest. Don’t want to pay that, either, do you? Reconciliation helps to ensure accuracy.

2. Did everything clear?

When you reconcile your bank account, it’s lovely if there are no transactions leftover that hasn’t cleared the bank yet. But in reality, that rarely happens. Especially if you wrote or mailed any checks toward the end of the month, they will probably show as uncleared. But what about something from February? Or July? You should have seen those on your bank statement by now. Investigate those entries as soon as possible.

Sometimes you will find that they are duplicates. You entered that check, then you forgot that you entered it, so you did it again. It happens. Research all of your “leftovers” to be sure they are valid. If they are valid, and just haven’t been cashed, maybe you need to call the payee and find out why. Sometimes checks get lost. Clear that up before you finalize your year.

The same is true for credit card accounts – or any account that you reconcile. Check for outstanding transactions and make sure they are valid.

3. Payroll transactions

Are you sure every payroll check is accurately entered into your books? Were there any corrections you had to make outside of your normal payroll schedule? Make sure those checks were recorded in the right way. You have to provide W2s to your employees. They’re all counting on you to give them accurate numbers. The total of your W2s has to match the numbers on your quarterly 941s. If it doesn’t, you need to find out why.

Nobody wants to file an amendment. Get it right the first time. This is another item that is tested when you reconcile your bank account. The reconciliation process will bring to light any extra payments that might not be recorded correctly. (Or any missing ones).

4. Independent Contractors

The same procedures apply here. You have to provide a 1099 to any independent contractor to whom you paid more than $600 in the year. You want to be sure all transactions are recorded correctly. Do a last-minute check for W9s. Ideally, you should have each contractor provide a W9 before you pay him or her. But even with the best intentions, that doesn’t always happen. Do a quick check through your records well ahead of the January 31 deadline. No one wants to be running around at the last minute chasing contractors to get their social security numbers.

5. Loan Balances

As soon as you get your year-end statement from your lender, be sure your books match the balance due in their records. If it doesn’t match, you probably need to account for the interest. Some people record the whole loan payment for the principle month after month and wait until year-end to split out the interest. That’s fine. Just don’t forget to do it. Interest is a deductible expense. You don’t want to miss the opportunity to record it. Additionally, you want your balance sheet to be accurate. The amount you still owe will show up as a liability. That number needs to be spot on as well.

6. Fixed Assets

Did you make any large purchases this year? That small desktop computer might be expensed completely, but if you bought a huge Mac Daddy, you might want to set that up as a Fixed Asset, which you will depreciate throughout its life. Consult your CPA for which large purchases need to be made assets and which can be expensed completely. Your CPA will also advise you on depreciation, another expense you don’t want to miss.

7. Future Large Purchases

Is your company vehicle gasping its last breath of life? It might be a good idea to replace it before December 31. What about new chairs, a laptop or two? Maybe even a new coffee pot. If you’re about to make this purchase anyway, and you had a profitable year, go ahead and buy those things before the end of the year. But consult with your CPA to make sure it’s to your advantage. There is no need to spend a hundred dollars to save ten.

8. Charitable Contributions

If you’re planning to donate to your favorite charity, now is the time to do it. Did you know that many non-profits rely on year-end contributions to cover most of their annual budget? Get those checks out before the end of the year to help your causes plan for next year, as well as to give you another deduction for this year. (At least right now, charitable contributions are deductible. Keep an eye on the new tax legislation to be sure.)

9. Accurate Accounting

There are two main financial statements in Accounting – the Profit and Loss and the Balance Sheet. Your Balance Sheet accounts continue forever. For example, your bank accounts, loans, and credit cards keep a running balance from the first day to the very last. The ending balance on December 31 is the new balance on January 1. Your Profit and Loss accounts, however, start over when your financial year ends. Your balances on December 31 are final for the year. On January 1, all P&L account balances are zero. You want to be really sure that everything is in its proper place before the New Year starts.

Sound like a lot of work? It doesn’t have to be. All of the tips listed above can be done regularly throughout the year. Make yourself a checklist and then, well, check it! Maybe quarterly is good enough for you. Maybe you want to take a look at these things monthly. It doesn’t matter. The point is, if you make it Best Practice to take care of these tasks throughout the year, then the only thing left to do on December 31 is pop the champagne. Happy New Year!

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