Accounting Matters Blog

Tips for Year-End

Let’s talk about getting your books and business ready for your tax preparer, while cleaning up your books and close the current year on a good note, which will start the next year on the right foot.
Small Business Guide - Year End - 7 Item Checklist


1. Get your financial records and books in order.
If you are a mom and pop shop, a sole proprietorship who has a full file of receipts that haven’t even been recorded in your books or even if you have a part-time bookkeeper, you need to be sure all your key financial transactions are recorded before you can do anything else in a New Year. To make it simple, here are few key areas to consider:
 All sales and purchases invoices/ receipts are recorded in the book
 Expenses are accounted or accrued for product or services consumed but not yet paid
 Review that outstanding customers’ records are updated and current. Write off bad debt expenses where necessary.
 Review all outstanding supplier payment list and make sure good received but not yet invoice are all recorded.
 If you sell products, conduct an inventory assessment and compare the results to your last inventory report.
 Make Depreciation Entries
 Reconcile all bank statements for any charges and to show true bank balance position.
You might have a list of vendor invoices that are still unpaid. Or a list of customers, who owe you money, be sure to keep an eye on both of these as this helps with cash flow forecast and give you a clean start for the New Year.


2. Prepare the financial statements for the year.

A very important step at year end is to prepare your financial statements - as these will be given to your tax preparer so that s/he has the correct information to prepare your return. Financial statements will assess your performance and position at year ended. A completed financial statements for a small business usually composed of three key components:
Balance Sheet - a snap-shot of the business financial situation at a particular point (year-end). It shows all your business assets, liabilities and the owner’s equity position. Balance sheet shows the liquidity of your firm as well as the key sources of your funding. Income Statement shows profitability of the business during the financial year. It compares the business revenues to expenses and the results are either a profit or loss.

Cash Flow Statement shows the inflows and outflows of cash in your business. Cash flow statement is generally prepared under 3 sub-headings:
 Cash flow from operating activities - The core activities of the business such as normal revenues and expenses during the year
 Cash flow from investing activities - It shows the fixed assets and investments purchased and sold during the year
 Cash flow from financial activities - Movement in sources of finance such as new loans borrowed and loan repayments during the year. It also include any new owner cash injection
Cash flow statement is a very important report for investors and lenders. . It shows the real flow of cash by eliminating all (non cash) items and accounting estimates including depreciation and accrual. It also reconciles the opening cash to closing cash position by showing the net increase or decrease in your business’s cash flow over the period.
3. Analyze the financial statement
Once you’ve prepared your balance sheet, income statement and cash flow statement, step back and take a look at the overall performance - use basic ratio analysis to understand the results deeper. Basic ratios like current ratio, total debt ratio, efficiency ratio and profit margin tells lot about the business performance and situation. Customer receivable analysis can show the customer’s bills and the number of days the bill have been outstanding. Are your current assets enough to cover your current liabilities?
4. Evaluate your results against the last year goals.
Now that you understand your results, it’s time to see if you have performed well; at least compared to the plan. You can perform the following comparisons:
 Compare the actual results to the annual budget of year under review. Of course, this assumed that you have prepared a business budget for the year. If you don’t, then start it this year, because budget is a good control tool for any business.
 Compare the actual results to the actual results of prior year. This reveals the decline or growth in the key numbers like sales, profit, cost etc.
 Compare the actual results to the industry average or a competitor.
By comparing the prior year, you should be able to answer some questions such as how you met or didn’t meet the budget? How did you do over the prior year? What areas might show improvement of expenses, or expenses that need further analysis due to overspending? Make some notes about any areas that might need a closer look when preparing your next year’s budget . If you need help in understanding your financials ask you tax person to help
If you have a number of employees, it is also important to request for their general feedback. Their candid feedback and opinion could help you to know the areas that need some improvement. For example customer service, employee motivations, new product development, public awareness, business social responsibilities etc.
5. Prepare your New Year budget (Plan).
Use the information on your last year’s financial performance and feedbacks, you can begin to prepare your New Year goals and turn them to a budget. A great tip in goal setting would be to use SMART meaning Specific, Measurable, Attainable, Result focused and Time-bound.
For example your business goal could be:
 an increase of 2018 sales by 15 percent compared to last year
 20% increase in number of active customers etc.
 post $100,000 profit by December 2018 etc.
For every major goal, it is important to prepare an action plan. Action plan is the summary of key steps that must be taken to achieve a specific goal. For example if you goal is to increase sales by 20%, the related action plan could be new product offering, new outlets, online shop or new strategic alliances.
Depending on the size of your business, employee engagement in business goal setting can positively impact their commitments to achieve these goals.
Start implementing your action plans in the new year .
All the planning in the world will not help you achieve your goals. You must take action. This will set the wheels in motion and create the necessary momentum you needed. Do not forget to learn from your last year mistakes and successes.
6. Assess your employees and consider giving bonuses
It does not matter if you have 5 or fewer employees, assessing employee performance can be a very important feedback for yourself and the company. The end of the year is the perfect time show your appreciation and gratitude by thanking them with a bonus (if profitable) or some small token if losses have been incurred. Keep them motivated and loyal during the tough times, This gesture will give everyone a sense of accomplishment and boost them to be excited about the new year ahead.
7. Print and Mail Out Tax Forms
Even if your fiscal year does NOT coincide with the calendar year, you must print and mail certain forms by a certain time.
• 1099s: These forms should be mailed no later than January 31 to any independent contractors you hired. Don’t delay in case there are errors.

• 1096: This form must be mailed to the IRS no later than January 31.

• Payroll Forms (e.g. W-2, W-3, 940, 941): Print and mail these forms as soon as you can, especially if you’re handling it yourself and not asking an accountant or firm to do it. Remember that your employees cannot file their taxes until they receive a W-2, and many people like to file as soon as possible. These forms should be mailed no later than January 31.

The end of the fiscal year is a crazy time for any business, but smaller businesses feel the pinch even more due to limited staffing and skill-set availability. Prepare yourself and make sure to cross off all of the steps necessary for a successful and responsible end of your

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