Simple Ways To Prepare Your Books For Year-End

Simple Ways To Prepare Your Books For Year-End
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Another Pandemic influenced year is coming to an end, and it is time to clean up your books and prepare for 2022. If you have been meticulous about keeping your records up to date throughout the year, closing your books for 2021and generating accurate financial statements will be a piece of cake. But, if your small business has been busy dealing with supply chain issues, employee health and safety, and a shifting customer base, preparing your books for year-end may be a challenge. 

We have prepared a short checklist of steps to simplify the process with that in mind. If you still need help, give us a call, and we will be happy to assist.

How to Prepare Your Books for Year-End

Closing your books is essential for several reasons. Most importantly, it gives you, the small business owner, meaningful information on the organization’s financial health, which assists in making strategic decisions for the goals and objectives of the upcoming year. In addition, other people are interested in your year-end numbers, like the IRS, banks and other investors, creditors, and of course, your employees.

An accurate year-end closing protects your business both financially and legally. To get that accuracy requires an update of income and liabilities and reconciling transactions for the year. With that in mind:

  • Create Invoices. If you have any unbilled invoices, get them out now. Of utmost importance is to have all income and expenses recorded and updated.
  • Send Out Reminder Invoices. Now is the time to put a serious effort into collecting receivables and recording the income. Customers who can’t pay may be written off as bad debt, but the IRS has specific rules regarding this.
  • Pay Bills From Vendors. Just as you want all income recorded, the same is true for expenses. Review and pay all current payables.
  • Reconcile Bank Accounts. Once you have updated income and expense, compare your general ledger entries with the actual bank statements and resolve discrepancies.
  • Update Fixed Assets. If you have purchased new assets (anything with a service life greater than one year) be sure they are added to your asset account and haven’t been charged as an expense item.
  • Run Depreciation Report. All your assets have an assigned depreciation schedule. Run a report and determine total depreciation for the year.
  • Verify Employee and Contractor Information. Employee W2s and contractor 1099s must have accurate contact addresses on them. Double-check your records to ensure you have current information.
  • Do a Year-End Inventory. Conduct an inventory on the day you close your books. Small businesses are expected to do an inventory at the start and end of each year.

You can run your financial reports and close your books when you have these checklist items done. Most accounting software makes this a simple process and will lock the books with only the owner able to make adjustments. Next, copy all your year-end reports for your tax accountant.

Year-end closing sounds like a lot. But if you keep current each month, year-end is just another monthly exercise. If your SoCal business isn’t in that condition today, call ASCEND Business Advisory at 888-297-3321, and we will assist you with your year-end books and help you get organized for 2022. Call us now!