While 2022 is behind us; we are still in the season of closing the accounting year and paying taxes. For any business, concluding a fiscal year helps prepare for the beginning of the next one by evaluating company transactions and understanding your organisation’s financial state. 

That’s where a year-end accounting checklist comes in. Having a year-end checklist can assist you in completing outstanding business tasks on time and in an organised way. 

You can write the items down or post them into a spreadsheet rather than relying on your memory. Then, when you complete the items, cross or delete them off the list. Seeing which tasks remain unfinished at a given time may assist you in deciding what to outsource or prioritise.

Year-End Accounting Checklist

Consider doing the following as part of your preparations for the fiscal year:

Gathering & Saving Documents

The first step is to gather all the necessary documents for the past year. This includes:

• Bank statements
• Loan statements 
• Payroll reports 
• Credit card statements 
• Invoices and receipts 
• Inventory counts and reports (if your business deals with inventory)
• Previous year’s financial statements 
• Previous year’s tax returns

I always recommend that you save these reports in either hard copy, soft copy or both, especially the bank, credit card and loan statements. You can write to your bank at any time to send you copies. However, it will probably cost you a few bucks and take time. To make it easier in the future, start saving such documents regularly and keep them in a safe and easy-to-access area. 

Next, you must review your books (all ledgers) to ensure that all the information is accurate. If you have been doing your small business’s bookkeeping regularly, the job will be easier. 

Recommended Read: Common Tax Deductions For Small Businesses

Review Bank Entries

Start with bank reconciliations to ensure there are no duplicates of postings or transactions in the wrong ledgers. For instance, it would not make sense to have a bank charge of $100,000. On the other hand, could you have posted a loan repayment in the bank charge general ledger? These are some of the things you need to go through and reconcile appropriately. 

Sounds like a lot of work, right? Yes, it is and can be pretty overwhelming if you have no or limited accounting knowledge. Therefore, I recommend you hire a bookkeeper or an accountant to help clean up your books. 

Review Accounts Payable And Receivable 

Accounts payable deals with money your business owes, while accounts receivable deals with money owed to your business. 

You need to review both accounts to ensure that you capture any sales or purchases made during the year. The money might not be paid or received, or you might have incurred an expense you are yet to pay for, but it affects your financials if you use the accrual accounting method. This is the time to post accruals and any prepayments. 

Take note of all delayed payments or collections for a follow-up to ensure the delays don’t affect your business’s cash flows for the coming year. This is the part where you also account for the late fee you charge, or your customers charge for late payments. Or write off uncollected payments that are already bad debts.

Have You Done Stock Take?

If your small business deals with goods, you need to review the inventory at the end of the year. The stocktake process is best done at the start of the year. However, if you have not done it yet, you can still get to it and do some reconciliations to figure out what you had at the end of the year. 

Conduct a current inventory evaluation and compare it with your most recent inventory report results. Make necessary adjustments to represent the accurate capital of the inventory at the end of the previous year. Additionally, you may wish to analyse items you do not sell, such as office equipment. Look for things that you can repair or replace. Then, you can budget for these in the next year’s budget.

Check Your Payroll Accounts

Next, you need to look at your payroll postings, including taxes and other statutory deductions. Is everything reconciling?  

Again, consult with an accountant. It will be more manageable and less overwhelming. It would also be best to start using accounting software to keep track of your payroll for this year. 

Prepare The Financials

With everything up to date, the next step will be preparing financials for the year. These will mainly include: 

The Balance Sheet

A balance sheet summarises a business’s financial position over a specified time. It contains information about the company’s assets, liabilities, and equity. A balance sheet is only balanced when the sum of assets equals the sum of liabilities and equity. 

An Income Statement

An income statement or profit-and-loss statement summarises a company’s income and expenses for a particular period. It captures details such as revenue, cost of sales, expenses, depreciation and taxes. You can use it to determine the profitability of your business.  

The Cash Flow Statement

A cash flow statement shows a summary of how cash flows within your business. It captures all the inflows and outflows for the year and any other specific period. While an income statement is ideal for showing the profitability of your business, a cash flow statement is the best financial document for determining whether your business has enough funds to meet its obligations or not. 

Related post: Understanding Profits vs Cash Flow For Your Small Business

Review & Strategize 

Now that you see how your business performed in the previous year, what are the goals and objectives for the coming year? Draw a budget and financial plan for the year, take lessons from the previous year and talk to your accountant or financial advisor as you plan for this year. 

File And Pay Taxes

With the financials for the previous year completed, it’s time to file taxes for the year before the deadline. So, what is your final tax liability? At this point, you need to engage a certified accountant or an auditor if you don’t have one yet to help review your financials. They might spot something you missed that might save you some tax money or save you from filing inaccurate reports. Then, when everything is in order, have your business’s income for the previous year filed and pay any tax liability on time.