Year-end bookkeeping is something many business owners put off until the calendar turns to January. But waiting until the new year to review your books can make it much harder to understand how your business performed and make informed decisions before December 31.
The good news is that there is still time to get your bookkeeping in order. With the final months of the year approaching, now is the perfect time to review your financial records and identify anything that needs attention.
Here are four things business owners should do now.
- Know where your business stands
Start by looking at your financial statements. Are you profitable? Is your revenue where you expected it to be? Have your expenses increased more than anticipated?
Understanding your financial position now gives you time to make adjustments rather than discovering problems after the year has already ended.
- Make sure your books are up to date
Review your bank and credit card accounts to make sure they have been reconciled. Look for transactions that still need to be categorized, outstanding invoices that need attention, and expenses that have not yet been entered.
Accurate bookkeeping depends on having complete and current information. The longer these items remain unresolved, the harder it becomes to get a clear picture of your business.
- Look for unusual changes
When reviewing your financial statements, do not focus only on your bottom-line profit. Look for expenses or revenue that have changed significantly from previous months.
Maybe advertising costs increased. Perhaps payroll grew because you hired employees. Your insurance expense may have changed, or revenue may be significantly higher or lower than expected.
These changes are not necessarily problems, but you should understand what caused them.
- Start preparing for year-end and tax planning
Clean bookkeeping makes it easier to close out the year and provide accurate information to your tax professional. It can also help you identify questions that should be addressed before December 31.
You may need to discuss planned purchases, estimated tax payments, equipment purchases, bonuses, charitable contributions, or other year-end transactions with your tax professional.
Year-end bookkeeping is not simply about checking a task off your list. Your books provide information that can help you make better decisions for your business.
If your bookkeeping is behind, do not beat yourself up. Start where you are. Reconcile your accounts, review your financial statements, correct what needs to be corrected, and ask for help if you need it.
The goal is to enter January with clean, accurate books and a clear understanding of how your business performed. That information can give you greater confidence and help you build a stronger business in the year ahead.
Key Notes
- Review your financial statements now so you know where your business stands before the year ends.
- Make sure bank and credit card accounts are reconciled and your books are up to date.
- Look for unusual changes in revenue, payroll, advertising, insurance, and other expenses.
- Identify outstanding invoices, uncategorized transactions, and missing expenses that need attention.
- Start conversations with your tax professional about potential year-end purchases, estimated taxes, bonuses, charitable contributions, and other transactions.
- If your bookkeeping is behind, start now rather than waiting until January or tax season to get help.
