With the end of the year quickly approaching, have you taken the necessary steps in order to close out the year? This article will highlight some points to remember as you prepare for year-end. By taking the time to consider what needs to be done for year-end close now, you and your business will save time and money down the road.
- Bank Reconciliation: Make sure that your bank balance reconciles to your bank statement. Ideally, bank reconciliation has been performed monthly and your accounts are in good shape for the year. By reconciling your bank statements on a monthly basis, it will make year-end close a much less arduous task and can help to uncover items that may not have been recorded, such as electronic deposits. It is also a good way to catch any errors that could have been made when transactions were recorded.
- Invoicing: Ensure that all invoicing for work performed and/or deliveries shipped are recorded.
- A/R: Follow up with any customers who still have an outstanding balance. You will also want to consider any accounts receivables that may need to be written off to bad debt.
- Inventory: Review your company’s inventory balance to ensure that it is correct. Also, is the inventory valued correctly? Have any of the items lost value since they were purchased and now need to be written down?
- Fixed Assets: Has there been a change in fixed assets? Did you sell or dispose of any during the year? If so, you will need to make sure that the sale or disposal of any fixed assets are reported on your company’s balance sheet.
- A/P and Out-of-Pocket Expenses: Verify all business expenses (i.e., cell phone, internet, mileage) and accounts payables have been recorded (i.e., 401(k), SEP IRA, and Simple IRA contributions).
- Loans: Verify your notes payable amounts match the loan statements. Were any loans paid off this year? Were any loans added?
- Vendors and Contractors: Make sure that you have collected W-9’s for all vendors and contractors who were paid $600 or more for the year, and remember that 1099’s are due on January 31st.
- Payroll Tax: Verify that payroll tax liabilities match quarterly payroll returns.
- Review your P&L: After performing all of the above points, review your Profit and Loss Statement for anything that looks out of the ordinary.
- Back-up: Save a back-up file to an external source should something happen to your system. After all, you wouldn’t want all that hard work you just put in to be suddenly gone.
- Budget: Now that you have prepared all of your records for year-end close, you can use them to help create your budget for 2021. In addition to estimating your income each month, you will also want to plan for tax payments throughout the year and any significant expenses you foresee in the coming year.
Contact me with any questions related to your year-end closing procedures and how we can help. You can reach me at the office at (781) 247-5569 or by email at stu@erocktax.com to further discuss.
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About Stu: With more than 30 years of experience as a tax professional, Stu Steinberg brings a broad depth of knowledge to his work with his clients. Stu founded Erock Tax to help provide tax and financial planning strategies to individuals, families and small businesses and is passionate about empowering his clients through education about their money health. Stu is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.