Closing out your books at the end of your fiscal year is extremely important. The continued success of your business, financially and legally, depends on accurate and timely accounting processes. Unfortunately, accounting is not a strong suit for many small business owners or independent contractors. That’s why it is critical to have a plan of action. To balance effectiveness and efficiency, utilize some of the many great accounting tools available to the modern entrepreneur.
Create a Checklist of Essential Items
Whether this is your first year closing out your books or your 20th, you should have an actual checklist to follow. Here are some of the essential items you need to understand or have completed before you can confidently close out your end-of-the-year books:
- All of your cash accounts are reconciled and agree with your bank statements.
- Your retained earnings agree with your tax returns.
- All of your asset accounts are appropriately stated to reflect your present value and inventory levels.
- Credit cards are reconciled.
- You have prepared a fiscal year-end trial balance.
- Your loans balanced agree with your financial statements, and interest is properly booked.
- Make all necessary journal entry adjustments (such as depreciation expenses and new fixed assets).
- Review your profit and loss statement once your balance sheet is accurate.
- Speak with your tax professional to discuss any other needs.
At this time, you may also want to review your company’s accounting system to make sure it is still adequate to handle all of your tax and accounting needs for the following year.
Use the Tools Available Through Your Cloud-Based Accounting System
If you are not already using an online, cloud-based accounting system, you should probably consider it for next year. A cloud-based accounting system can be helpful it can be when it comes to syncing tasks, sourcing information, completing forms quickly and double checking to make sure everything is in order.
Your cloud-based solution should have several ready-made templates that you can pull to figure out whether you are running a current profit or loss, which of your receivables accounts are delinquent (or due soon), what your inventory levels are and whether you need to send out any last-minute invoices.
If you are using QuickBooks Online, you can amplify your accounting functionality by connecting your QuickBooks account with other apps. Popular ones include:
Don’t Be Afraid to Consult Experts
Neither the tax code nor the International Financial Reporting Standards were written for the average small business owner or freelancer. It is OK if you don’t understand every in and out of the process, but it is not OK to let your lack of expertise guide your business into trouble. Reach out to experts if you need help.