Is your house clean for years end?
2020 is about to be over, FINALLY!!! Right??? I know we have had to spend a lot of time indoors and secluded in our own house. But, is your "house" ready for years-end?
Being a business owner is not just a matter of running daily operations and making decisions; it goes further. Have you been working diligently on your business's accounting side to have your books ready with accurate financial information to file your tax return on time and, more importantly, know how much you are making and how the business is performing?
We understand that the year-end process might be daunting and overwhelming; that is why we have created this little checklist to help you navigate this process seamlessly.
#1 RECONCILE !!!!
A fundamental step in the closing procedures of your books is account reconciliation. Ensure that all transactions are recorded, and the balances of your bank accounts match your books.
Also, include any bills and/or invoices for the period, even if they are outstanding.
This process must be performed for all bank accounts, credit cards, existing loans, inventory, and payroll.
#2 PAYROLL ACCURACY
You must verify that all your employee information is up to date; important to check the address on file is still current and no changes in name. All paychecks must be properly recorded and accounted for each employee, including overtime, bonuses, and/or commissions paid throughout the year.
Any changes must be performed before issuing the W-2's to avoid any amendments.
Questions you should ask yourselves... Is my stock accurate? When was the last time I counted and reconciled inventory against my point of sale? The idea here is to have zero to none discrepancies between your inventory count and your accounting system.
If for any reason, you find some deficiencies, it might be a good time to analyze options that can improve this area of the business and help you eliminate unnecessary stress.
#4 MISSING INVOICES?
Is there any missing revenue? Run open invoices or a receivables report, review the list of open items, also check if any estimates need to be converted into invoices. Remember, estimates are non-posting transactions; therefore, they don't affect revenue.
If you find any missing invoices, go ahead, issue them and be sure to send them out to the client. If you have invoices past due with aging +90 days, reach out and try to collect those before year-end!!!
#5 GATHER YOUR W-9's
If you have vendors that provide you services and you pay them more than $600 in a calendar year, you are required to issue Form 1099-NEC. This is a new form coming back for 2020; for more information, visit this link to read a previous article about form 1099-NEC.
As a recommended practice, we encourage our clients to hand out form W-9 when engaging with the contractor before any payment is issued. By doing so, you avoid any delays and the hassle to be asking for information after the job has been completed and paid.
#6 PERFORM A REVIEW OF YOUR FINANCIAL STATEMENTS DRAFT
After steps 1 through 5 are completed, review your Balance Sheet and Profit and Loss statement and look for any inconsistencies that caught your eye. Look for negative balances or any amounts that seem odd or don't match your estimations.
#7 CLOSE YOUR BOOKS
You made it this far, and you should be proud of yourself. After all the entries are done and the balances are correct, close your books and secure with a password if possible. By doing so, you minimize possible future mistakes that could set off previous years because It is so easy to make a mistake on a date (especially when starting a new year).
As a final recommendation, take your time, follow the steps, and don't be afraid to reach out if you need a helping hand!!!
We understand this might seem a little overwhelming; if you need any help navigating this or any other related issue, please check in with us and schedule a free session with our team of experts.
Founder and Managing Partner
WELCOME TO YOU ADVISORY SERVICE HUB!