Closing out your books at the end of your fiscal year helps you wrap up another year of financial activity and prepare for the next. Accurate and timely accounting processes help support your business success financially and legally. Having a year-end accounting plan of action and some useful accounting tools helps you effectively and efficiently finish the year well.
Create Your QuickBooks Year-End Checklist
Whether this is your first year closing out your books or your 20th, it’s a good idea to create a checklist to follow. That list keeps you on track and helps you hit all the important points. The following checklist helps you confidently close out your end-of-the-year books:
- Reconcile all of your cash accounts so they agree with your bank statements.
- Verify that your retained earnings agree with your tax returns.
- State all of your asset accounts appropriately to reflect your present value and inventory levels.
- Reconcile your credit cards.
- Prepare a fiscal year-end trial balance.
- Verify that your loan balances agree with your financial statements and that you properly book interest.
- 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.
- Check in with your tax professional to discuss any other needs.
At this time, you may also want to review your company’s accounting processes to make sure it’s still adequate to handle all of your tax and accounting needs. Updating software, adopting a cloud-based accounting system if you’re not already using one, and streamlining your day-to-day logging of transactions can help you prepare for next year’s year-end clean-up.
Year-End Profit and Loss Reports
The year-end profit and loss report or “transitory accounts” summarizes the incomes and expenses of a business for the year. You can use this report to find out how profitable your business is and determine the cost of running your business. This report also allows you to forecast your sales and expenses for the next fiscal year.
QuickBooks offers an already created profit and loss report. You simply click on the “Customize” button, click “Rows/Columns,” select “Columns” and choose year, and finally click “Run Report.”
This report includes information, such as sales, operating costs, operating profit and overall profits.
Year-End Balance Sheet
As a small business owner, you can view the balance sheet report as a financial snapshot of your business. You can clearly see how much you own and how much you owe. Towards the bottom of the report, take note of the section labelled “Retained Earnings.” This line item tracks your company’s net worth over several years.
Notice that your net profit for the fiscal year gets added to this total. In a nutshell, your balance sheet tells you whether your hard work throughout the year has paid off.
Use Your Cloud-Based Accounting System’s Tools Wisely
If you’re not already using an online, cloud-based accounting system, you should consider it for next year. A cloud-based accounting system can be helpful 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 you can pull to figure out whether you’re 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’re already using QuickBooks Online, you can amplify your accounting functionality by connecting your QuickBooks account with other apps. Popular ones include:
- Sync with Square: Automatically import transaction data into QuickBooks.
- TSheets Time Tracking: Simple, fast time tracking and scheduling, including payroll.
- Hubdoc: A one-stop-shop for all of your financial documents.
- Insightly: Customer relationship management and project management.
Consult Experts When Needed
You may have questions about the tax code, especially if you’re starting a new business. Reach out to experts, including tax accountants and tax attorneys, if you need help. A tax accountant understands what you need to accomplish when handling your year-end accounting and can make sure you’re following your checklist properly without missing any steps. An accountant can also give you advice on streamlining and improving your processes for next year.
Closing your books at the end of the year is much easier when you understand the process and have an organized accounting system in place. 5.6 million customers use QuickBooks. Join them today to help your business thrive for free.