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Your End-of-Year SmallBiz Finance & Accounting Checklist

Certainly, not every small business owner can afford to outsource their accounting & bookkeeping needs. You should, however, plan to have a professional prepare your income tax return. This same tax person, depending on their background and expertise, may also provide a quick review of your data to make sure you meet your compliance requirements.

That tax advisors oversight is certainly important, but it’s not always enough to ensure the quality of your entire accounting system. In the event that business owners cannot afford to hire an accounting professional, they must take ownership of their management and compliance needs to ensure that their company’s finances are in order.

Using this checklist will help you to save money by keeping the review with your CPA or Tax Advisor as efficient as possible. This checklist is also designed to help you understand how to close your year like a pro!

Before you dive in, run a few reports and look for anomalies.
If possible, run a year-to-year report with a % variance column so that you can see if there were any unusual fluctuations from the previous period. Often times, you can see right away if there’s a number that just doesn’t seem right. Did your assistant miscategorize a major expense? Perhaps your salesperson closed a huge deal and you forgot to enter an invoice, which is why your revenues are down. Or maybe you didn’t capture all of your expenses because you switched banks and didn’t set up the new bank feed. Look for the obvious problems and fix them!

Once you feel that your data is accurate and up-to-date, move on to the next steps:

  • Reconcile all bank, credit card and loan accounts in your system.
  • Verify petty cash account is accurate, including correct purchase dates.

These first two steps will help to confirm the accuracy of your accounting data and provides a great opportunity for spotting fraud too. ADVICE: The world of manual reconciliations is changing. If you want to make this process easier and leverage the power of banking rules, check out Xero’s approach to bank reconciliation.

Now, let’s dig into the next few end-of-year steps:

  • Confirm journal entries for all items paid with personal funds (if any).

TIP: Try to find a way to separate these next year. Create a system for better tracking your personal and business expenses and consider cloud-based applications like Expensify or Receipt Bank.

  • Review past-due receivables (if any):

Here you will decide whether you believe customers will eventually pay, whether to send past due bills to collections, or to write them off completely as Bad Debt Expense.

Now’s also the time to contemplate future changes to your receivables management process: do you need to change the way that you remind people, are you making it easy for them to pay you, is it time to or do you simply need to automate the process? Check out great tools like Chaser+Xero or Invoice Sherpa.

  • Review past-due payables (if any):

Can you get those debts off your books and settle out with your vendors? If cash flow permits, give the gift of ‘Paid in Full’ to your valued providers and start the year off right, just in case you need to call in a favor later in 2017. If cash flow is tight, give them a call and consider negotiating a win-win payment plan.

Let’s continue with some of the more complex transactions, which may require some consultation with an accounting pro if you don’t understand…:

  • Review your inventory (if any): Determine the value of items not sold and report unsellable inventory to your accountant so it can become a write-down.
  • Verify that all journal entries for depreciation expense have been entered for each asset that has been acquired. Confirm the proper recordkeeping of depreciation with your accountant, if you aren’t familiar with this, or simply save this step for a professional.
  • Verify all necessary journal entries have been made to accrue for payroll tax liabilities and prepaid expenses (rent, insurance, legal retainers, etc.) This one, too, may require the oversight of an accounting professional. Want to avoid this problem in the future? Consider working with a cloud-based payroll system that integrates with QuickBooks Online or Xero, like long-time favorite Gusto (formerly Zen Payroll)!

Cool! We’ve gotten our file up to date. Before we run reports and send info to your tax accountant, let’s take a look at those same reports we ran at the beginning. Drill in on those anomalies and make sure you’ve cleared them up before you move to the next step.

Remember: the cleaner your accounting data, the easier it is for your tax accountant. This means a quicker turnaround for your tax filings and will likely reduce your costs.

Now, let’s take care of some government forms:

  • Print & send payroll forms (to employees) and federal filings, including W-2s, W-3s, 940s, 941s, and 944s
  • Print & send 1099’s to independent contractors – due January 31, 2017
  • Print & send Form 1096 to the IRS – due January 31, 2017

Now that you’ve tackled your compliance needs, it’s time to reflect on your numbers and apply your insights into next year’s plan. It’s time to budget & forecast for your future growth!

  • Evaluate your Customer Sales & Profitability Reports to see which customers are worthy of your future marketing dollars. Set a few strong sales goals, target your efforts and increase revenue!
  • Evaluate your Expense Reports and see where you can streamline your operations. Maybe it’s time to automate some back office administration and move towards #ZeroDataEntry.
  • Review Budget-to-Actuals to see where you can improve in your planning process and drive greater performance among your team. This will help create the upcoming year’s budget too as you work towards smarter financial goals.
  • Create a budget & forecast a few scenarios for the upcoming year: At this point, you know how you did last year (and hopefully the year before). You’ve got a stronger sense of where you can drive sales and manage costs, and you’ve discovered new insights to make better business decisions. Good luck & happy growth!

Want to step your game up when it comes to the planning process?

Consider a tool like LivePlan to help you get through your next big business idea. Want to explore new strategies for managing cash? Consider ProfitFirst. And don’t forget: Both QuickBooks & Xero offer a budgeting tool that allows you to run your Budget-to-Actual reports without having to be an Excel wizard! If you want to dive deep into the world of forecasting, consider platforms like Float or Crunchboards.

At SUM Innovation, we have a favorite industry slogan that “an ounce of prevention is worth a pound of cure.” There’s a lot of work that goes into managing a great finance & accounting system. If this list seems overwhelming, or you would rather spend your time enjoying the holidays, give us a call! We are happy to conduct a review of your accounting system.

Give us a call today at (212) 242-6010 and schedule an initial consultation or email our Director of Sales, Alexis McClellan, at alexis.mcclellan@suminnovation.com and let us know about your end of year accounting needs.

HUGE SHOUT OUT to SUM Innovation’s VP of Accounting Technology Samantha Kowalski for helping to write this article.

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