Year-end has a way of arriving quickly.
One minute, you’re reviewing third-quarter results. The next, you’re gathering documents, answering accounting questions, reviewing payroll records, and trying to figure out why an account hasn’t reconciled in three months.
A smoother year-end close usually doesn’t begin in December.
It begins with making sure your financial records are current enough to identify problems while there is still time to address them.
For business owners, October and November can be valuable months for doing exactly that.
Start With the Books You Have Today
Before thinking about year-end tax strategies or next year’s goals, make sure the financial information you’re using is reasonably complete.
That means looking for some of the common issues that accumulate during a busy year:
- Bank or credit card accounts that haven’t been reconciled
- Transactions that are still uncategorized
- Duplicate entries
- Missing receipts or invoices
- Old accounts receivable balances
- Vendor bills that haven’t been entered
- Loan activity that may not have been recorded correctly
- Owner transactions that need clarification
None of these issues is unusual.
The problem is allowing them to sit until the books need to be finalized.
Reconcile the Balance Sheet, Not Just the Bank Account
Business owners naturally pay attention to the Profit & Loss statement because it shows revenue and expenses.
But year-end preparation should also include the Balance Sheet.
Take a closer look at cash accounts, credit cards, loans, accounts receivable, accounts payable, fixed assets, payroll liabilities, sales tax liabilities, and owner or shareholder accounts.
Ask a simple question:
Does each balance make sense?
If the books show a loan balance that doesn’t agree with the lender’s records, or receivables include invoices that were actually paid months ago, those discrepancies should be investigated.
A clean Balance Sheet can make the year-end process considerably easier.
Review Accounts Receivable
If customers owe your business money, review those balances before year-end.
Some invoices may simply need follow-up. Others may have been paid but recorded incorrectly. And some balances may be old enough that their collectibility needs to be discussed.
This isn’t just an accounting exercise.
Your receivables tell you something about cash flow and customer payment patterns.
A business can report strong sales and still experience cash-flow pressure if too much revenue remains uncollected.
Look at Accounts Payable Too
The same review should happen on the other side.
Are there vendor bills that haven’t been recorded?
Are there balances showing as unpaid that were actually paid?
Are large expenses expected before year-end?
Understanding what the business still owes provides a more realistic picture of its financial position.
Review Fixed Assets and Major Purchases
If your business purchased equipment, vehicles, furniture, technology, or other significant assets during the year, make sure those transactions are properly identified.
Don’t wait until tax preparation begins to try to remember what a large payment from eight months ago represented.
Keep invoices, financing documents, purchase agreements, and other relevant records together.
This also creates an opportunity to discuss any major purchases you’re considering before year-end.
Don’t Forget Payroll
Payroll deserves its own year-end review.
Check employee information, payroll tax deposits, payroll filings, compensation records, and any unusual payroll activity.
If there are discrepancies, finding them in October or November generally gives you more time to investigate than discovering them while preparing year-end forms.
Business owners should also make sure that any year-end compensation decisions are coordinated with payroll before applicable deadlines.
Review Your Year-to-Date Financial Statements
Once the books are reasonably current, step away from individual transactions and look at the business as a whole.
Review your:
Profit & Loss statement. How did revenue and expenses compare with expectations?
Balance Sheet. What changed in the financial position of the business?
Cash flow. Is the business generating enough cash to support operations and upcoming obligations?
Budget-to-actual results, if applicable. Where did actual performance differ significantly from the plan?
Don’t just run the reports.
Ask what they’re telling you.
Year-End Preparation Is Also Planning
One of the biggest advantages of cleaning up the financials before December is that you can actually use the information.
Accurate year-to-date results can support conversations about estimated taxes, planned purchases, retirement contributions, cash needs, compensation, and other year-end decisions.
If the numbers aren’t reliable, planning becomes much more difficult.
A Better Close Starts Before the Year Ends
Year-end doesn’t need to become a scramble to reconstruct twelve months of financial activity.
Start earlier.
Get the books current. Reconcile the accounts. Review outstanding balances. Gather missing documentation. Then use those financials to understand where the business actually stands.
The objective isn’t simply to close the books faster.
It’s to enter the new year with financial information you can trust.
Gordon & Associates CPA, P.A. helps businesses maintain organized financial records and gain clearer insight into their financial position throughout the year. If your books need attention before year-end, now is a good time to begin the review.
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