Before 2020 comes to an end, you need to square away several accounting tasks. Your accounting books should be organized, up-to-date, and ready for the transition into a new year. Make sure you check these 10 procedures off your year-end accounting closing checklist. Keep in mind, your year-end checklist might differ from another business’s checklist, depending on your size and processes.
1. Run Financial Reports
At a minimum, put together a profit and loss statement, a balance sheet, and a cash flow statement. Look at where your money went last year and determine whether you’re on track to meet your profit goals and cash flow needs. If you’re a businessowner that is not actively involved in management, consider having a year-end audit or review of your financial statements prepared by a CPA firm to give you comfort of their accuracy.
2. Get Your Vendor Lists in Shape
Update addresses, phone numbers, and the names of your key contacts. Delete or archive vendors you don’t use anymore. This yearly housekeeping will help keep your lists organized and ready for orders and payments in the coming year.
3. Critically Review Your Policies, Procedures and Make Changes
During the year, you may not have time to review policies, such as billing, practice management, accounting, personnel, operations and consultations. At year-end, it is a good idea to look at how you did things and ask yourself whether you can improve in some way.
4. Account for Inventory
You must get an accurate count of the materials and supplies you have on hand if your business stores inventory. If your business has physical inventory, complete an inventory check before year-end. Match your inventory totals to your balance sheet. If you find discrepancies between your count and balance sheet, adjust. Accounting for inventory at year-end can help you know how much you spent on inventory during the year and its value.
5. Start or Contribute to a Retirement Plan
Make payments to your retirement plan or set one up before December 31 to reduce your income for this year. Now is the time to max out your contributions. If you haven’t yet set up a retirement account, talk to a financial advisor to determine which plan is best for your business. Boeckermann Grafstrom & Mayer recommends Cornerstone Private Asset Trust Company, a BGM Group Company, for Retirement and 401K Services.
6. Make a List of Your Business Accomplishments from the Past Year
It’s easy to forget about the milestones you’ve achieved and the obstacles you’ve overcome. Listing them is a great feel-good task. Once you’ve made your list, be sure to share it with your employees and recognize them for their contributions.
7. Meet with Your Accountant
Have your accountant prepare a tax projection so you understand your tax liability come April. If the projection is prepared before December 31 you still may be able to do things to reduce your tax liability for 2020. In 2020 it is even more important to understand any tax implications related to the CARES Act. This is also the time to start the discussion of tax planning for 2021. Reach out to your Boeckermann Grafstrom & Mayer tax professional or complete the Contact Us Form to discuss your specific situation.
8. Talk to an Attorney
Making the time for an annual legal consultation can show you what you need to do to keep up with regulations, contracts, and employment laws that affect your small business. An attorney also can help you evaluate and minimize the legal risks you or your business may face.
9. Identify Your Needs for Staff, Hiring, and Outsourcing in 2021
The end of the year is a great time to think about the tasks you don’t like doing or don’t have the time or expertise to do well. Make plans to hire staff or outsource to consultants to take some things off your plate. Decide whether you’ll need a larger workforce in the coming year and, if so, budget the money to pay for it. Outsourcing some of your accounting needs could allow you to cut costs without impacting your accounting accuracy. Learn more about our Outsourced Accounting Services Group and read Why Choose Outsourced Accounting Services for Your Small Business?
10. Set Goals for the Coming Year
The end of the year is a natural time to reflect on, and analyze, your business. Assess whether the business is where you want it to be, its prospects for the future, and whether your current business practices are adequate. As you reflect, set goals for the year to come.
The end of the year is the perfect time to prepare for changes, so that you can start the New Year with a relatively clean slate. The insight you will gain from this process is invaluable and can mean the difference between success and failure.
If you have questions or would like to learn more, contact Dane Boeckermann at email@example.com.
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