5 Critical Bookkeeping Checks Before Year-End

How a Bookkeeper Can Help You Wrap Up the Year

 

As the year comes to a close, business owners are focused on wrapping up projects, assessing annual goals, and planning for the year ahead. However, one crucial part of year-end preparation is often overlooked: reviewing and cleaning up your financial records. Proper year-end bookkeeping ensures that your finances are accurate, taxes are manageable, and you are set up for success in the coming year.

With 20 years of experience, I know that taking the time to complete a few essential checks before year-end can make a significant difference for your business. In this blog, I will guide you through five critical bookkeeping checks every business should complete before the end of the year. Partnering with a professional bookkeeper can make these tasks easier and more efficient, leaving you free to focus on planning your growth for the next year.

1. Verify All Transactions Are Recorded and Categorized Correctly

Throughout the year, it is easy for transactions to be missed or miscategorized. Small errors can add up, leading to inaccurate financial statements and potential tax issues. Before year end, it is essential to review all transactions and ensure they are recorded correctly in your accounting system.

Accurate categorization is especially important for tax purposes, as different types of expenses may be deductible in different ways. For example, office supplies and business meals may both be deductible, but they are recorded in separate categories and may have different rules regarding deductibility. Ensuring that all transactions are categorized correctly also makes it easier to analyze your business’s financial performance.

A bookkeeper will review all your transactions, correct any misclassifications, and ensure that your financial records are complete and accurate. With their expertise, you can avoid errors that could affect your tax filing and gain a clearer picture of your business’s financial health.

2. Review All Accounts Receivable and Payable for Accuracy

Accounts receivable (AR) and accounts payable (AP) are two critical areas that require attention before the year ends. Reviewing AR ensures that you have a clear picture of outstanding invoices, so you can follow up on overdue payments and bring in revenue before year-end. Meanwhile, reviewing AP helps you ensure that all expenses are accounted for and that you are aware of any payments due soon.

This review process allows you to spot discrepancies, such as unpaid invoices or duplicate bills, which can affect cash flow. Additionally, understanding your AR and AP at year-end makes it easier to plan for taxes, as you will have a clear picture of your income and expenses.

A bookkeeper will perform a detailed review of your AR and AP, identifying overdue invoices and ensuring all expenses are recorded accurately. They will also help you reconcile any discrepancies, giving you a clear view of your cash flow and ensuring that your financial records are up to date.

3. Reconcile Bank Accounts, Credit Cards, andLoans

Reconciling your bank accounts, credit cards, and loans is a crucial step to ensure that your recorded transactions match the actual balances in your financial accounts. Any discrepancies between your records and bank statements could indicate errors, such as duplicate entries, missing transactions, or even fraudulent charges.

Year-end reconciliation provides peace of mind that your financial statements are accurate and that you are prepared for tax season. Additionally, reconciling loan balances allows you to verify the amount of interest paid over the year, which may be deductible, and ensures that your liabilities are accurately represented.

A bookkeeper will handle the reconciliation process for you, checking your bank, credit card, and loan accounts against your accounting records. They will resolve any discrepancies, giving accurate financial statements and reducing the risk of errors that could impact your tax filings.

4. Take Inventory Count and Adjust Records for Discrepancies

If your business carries inventory, conducting an end-of-year inventory count is essential. An accurate inventory count helps you identify any discrepancies between your physical stock and your recorded inventory levels. Common issues include theft, damage, and miscounts, which can all affect your inventory records and, ultimately, your cost of goods sold (COGS).

By reconciling your physical inventory with your records, you ensure that your COGS is accurate, which is critical for calculating your gross profit. An accurate inventory count also helps you make informed decisions about stock levels, product ordering, and potential write-offs for unsellable items.

A bookkeeper will assist you in conducting an inventory count and adjusting your records to reflect the actual inventory on hand. They will ensure that any discrepancies are recorded accurately, giving you a true picture of your COGS and inventory levels.

5. Prepare Preliminary Financial Statements for Review and Adjustment

At year-end, preparing preliminary financial statements, including the Profit and Loss Statement, Balance Sheet, and Cash Flow Statement, is essential for understanding your business’s performance. These reports provide insights into your revenue, expenses, assets, and liabilities, giving you a complete picture of your financial health.

Preliminary statements allow you to review your financial performance, identify any final adjustments needed, and plan for taxes. This review is also an opportunity to discuss your business’s financial goals for the coming year and make informed decisions about budgeting and cash flow.

A bookkeeper will prepare and review your preliminary financial statements, ensuring they are accurate and up to date. They will help you identify any final adjustments and provide insights into your business’s performance, helping you start the new year with a clear financial strategy.

 

Year-end bookkeeping can be a daunting task for business owners, but it is an essential part of maintaining accurate financial records and preparing for tax season. Completing these five critical checks ensures that your books are in order, your financial statements are accurate, and your business is ready to move forward confidently.

 

Ready to get your books in order before year-end? Contact Beaver Bookkeeping today for a free consultation and see how we can help you complete these essential bookkeeping checks!