As the year comes to a close, small business owners are gearing up for a critical task – year-end bookkeeping and accounting. Year-end Bookkeeping is essential for maintaining financial health, ensuring compliance with regulations, preparing for taxes, and setting the stage for a successful new year.
In this article, we will guide small business owners through a comprehensive year-end bookkeeping and accounting checklist to streamline the process so you can close out the year strong and kickstart the new fiscal year. The end of the year is a hectic time for small business owners.
Between catching your breath after tax season and managing holiday sales, year-end bookkeeping and accounting tasks understandably fall to the bottom of the to-do list. Prolific Financials understands the stress business owners face with Accounting compliance and closing the books at year-end. Check out our year-end bookkeeping checklist to organize your finances and successfully wrap up the year.
1. Get Your Books Caught Up
The first step is to make sure that your books are up-to-date. You can do this by:
● Accounting for all bills and invoices, even if they haven’t been paid yet.
● Reviewing bank and credit card statements to confirm that they match.
● Recording any expenses that you paid for with personal funds.
We suggest doing the following to tidy up your year-end Accounting:
Review and Reconcile Accounts:
The first step in your year-end bookkeeping checklist is to review and reconcile all your accounts. This includes bank statements, credit card statements, and any other financial accounts. Look for any discrepancies and resolve them promptly. Reconciliation ensures that your financial records accurately reflect your business transactions.
Update and Organize Financial Records:
Take the time to update and organize your financial records. Ensure that all transactions are accurately recorded in your accounting system. This step is crucial for producing reliable financial statements and simplifying the tax preparation process.
Inventory Management:
For businesses dealing with physical products, a year-end inventory check is essential. Verify your physical inventory against your recorded inventory levels. This process helps identify any discrepancies, such as lost or damaged items, and ensures accurate financial reporting.
Fixed Assets Assessment:
Review and update the value of your fixed assets, such as equipment and property. Determine if any assets need to be depreciated or if adjustments are necessary. This step is crucial for maintaining an accurate balance sheet.
Accounts Payable and Receivable:
Assess your accounts payable and receivable. Follow up on any outstanding payments and ensure that all invoices are accounted for. This step helps maintain healthy cash flow and improves your financial position going into the new year.
Tax Planning:
Collaborate with your accountant to develop a tax planning strategy. Consider any available deductions and credits that can optimize your tax liability. Timely tax planning can result in significant savings and a smoother tax filing process.
Employee Benefits and Payroll:
Review employee benefits, such as retirement plans and healthcare, and ensure that all contributions and deductions are accurate. Verify payroll records to avoid any discrepancies in W-2s and other year-end reports.
Financial Statements:
Generate and review your financial statements, including the income statement, balance sheet, and cash flow statement. Analyze the trends and identify areas that need attention or improvement. This step provides valuable insights into your business’s financial health.
Compliance Check:
Ensure compliance with regulatory requirements. Stay updated on any changes in tax laws or reporting regulations that may affect your business. Compliance is crucial for avoiding penalties and legal issues.
Set Goals for the New Year:
Use the insights gained from your year-end review to set financial goals for the upcoming year. Whether it’s increasing revenue, reducing expenses, or expanding your business, having clear goals will guide your financial decisions and contribute to your long-term success. Accurate records ensure reliable financial statements that you can count on.
If your books are behind a few months, or even years, you are not alone—25% of business owners are behind on their books and are in need of Catch up Bookkeeping and Bookkeeping Clean up services. Prolific Financials online Bookkeeping & Accounting services provide catch up bookkeeping services and Bookkeeping Clean up Services, so you can focus on the future.
2. Collect the Necessary Forms
Once January arrives, your accountant will request certain forms to close your books and file your small business taxes. Be sure to collect them as soon as possible to ensure a smooth start to the new year. This including issuing out all the essential forms such as W-2’s and 1099’s. Here are common forms and their deadlines.
FORM W-2
Business owners use form W-2 to report salary information for their employees. It also helps businesses report the taxes they withhold from paychecks. Employees need this information to file their personal tax returns. The W-2 form reports wages payable to employees for that entire fiscal year. Business owners are responsible for sending this form to the IRS. Employers must provide the form to their employees no later than January 31st so that employees have enough time to file their taxes.
FORM W-9
If you worked with an independent contractor or vendor and paid them $600 or more, you will report those payments to the IRS using Form 1099-NEC. The 1099 form reports non-employee compensation payments to independent contractors and freelancers for the duration of the fiscal year. The information you need to complete this form is on Form W-9, which you can collect from your contractors. If any W-9s are missing, reach out to your independent contractors and have them complete the form before the end of the year.
SCHEDULE K-1
CPAs provide the Schedule K-1 or Form 1065. The Schedule K-1 must be sent to shareholders and partners by March 15th. S-Corporation shareholders and partnership members use it to report their share of the business’s profits and losses. They’ll also include the form with your personal tax return.
FORM 1099-K
The 1099-K tracks the payments received through third-party payment networks, like PayPal,, Stripe, Square, and Shopify, and others. This will also start including payments made via Zelle, Venmo, and CashApp as well. You should receive one 1099-K from each of the Online Payment Networks you use by January 31st. You are required to complete each one. Your gross receipts must be at least as high as the amount that you report on your 1009-K.
The 1099-K shows gross sales, which is the amount before fees are deducted. What appears in your bank account is the Net Amount, the amount after fees are deducted from the Gross Amount. The sales from each vendor must be reported as the Gross Amount, which is what appears on the 1099-K. If you use freelancer platforms like Upwork or Fiverr to hire independent contractors, they may also send 1099-Ks to your freelancers instead of 1099-NECs.
Since they are considered Online Payment Networks, these platforms typically send 1099-Ks to freelancers that make over $20,000 a year and have at least 200 transactions. However, if you paid freelancers more than $600 outside of their platforms, then you will need to send out a 1099-NEC.
3. Follow Up on Past-Due Invoices
Review past-due invoices to see what you are owed. If there are any outstanding payments, reach out to your customers before the end of the year to successfully close your books. Reviewing your Accounts Receivable Aging Summary prior to year-end will ensure you catch any outstanding overdue payments so you can report on the correct sales number on your taxes.
4. Account for Inventory
If your business stores inventory, perform an end-of-year inventory count to make sure your totals match your Balance Sheet and your books. This review will provide insight into waste and loss management, as well as reduce inaccuracies in inventory counts and receivings.
5. Review Your Financial Statements
Once you or your bookkeeper completes your bookkeeping, review your financial statements to confirm your numbers are correct. You can also take that time to review how your business grew over the course of the year. Was there a steady increase in profits? Can you identify connections between your costs and sales? The financial statements provide visibility to confirm that you are on track to meet your goals, make projections, and prepare for the future.
6. Get Expert Accounting Help
If you’re feeling overwhelmed with year-end bookkeeping, reach out to an online Accounting service like Prolific Financial. Prolific Financial’s bookkeeping and accounting team provides monthly bookkeeping and accurate financial reports. We’ll give you financial visibility throughout the year and deliver insights to make strategic business decisions.
We understand juggling the holiday season stress while running a business can be hectic and oftentimes small business owners completely neglect their Bookkeeping at year-end and end up paying the price during tax season. Although this year-end bookkeeping and accounting checklist can help you prepare for tax time, you don’t have to do it alone.
Prolific Financial has a range of plans with flat monthly fees. You can get certified, professional online bookkeeping, accounting, tax, or CFO services to help you manage your finances and grow your business.
Schedule a call with one of our online accountants to get started.
