End of Year Bookkeeping Checklist for Small Businesses
Introduction: Why is Bookkeeping a Necessary Yet Overwhelming Task for Small Businesses?
One of the most important aspects of running a small business is keeping up with the financial side. And one of the first tasks for any small business owner at the end of a year is ensuring they have completed their end-of-year bookkeeping.
The bookkeeping process is a necessary yet overwhelming task for small business owners. It is necessary because it provides valuable information and data on the company’s financial performance. It can be overwhelming because of the sheer volume of work that needs to be done and the time constraints imposed on small business owners.
However, there is no way to avoid this because getting it right is in the best interest of your business.
Below, we give the bookkeeping checklist for the end of the year. This checklist will help ensure that you have done everything necessary to provide a clean slate for the new year and file accurate tax returns in the upcoming tax season.
1) Reconcile your bank statement and credit card statements
This will allow you to see if any transactions need to be reconciled and whether or not any transactions need to be disputed.
Reconciliation is a process of reviewing and correcting errors in the bank statement. Reconcile can also mean to make up for a loss or deficiency. Reconciling your bank statements is not always easy, and it may take some time to complete. The key to successfully completing this process is to be organized and have a plan before you start reconciling.
Reconcile accounts such as your Checking account(s), savings account(s), PayPal account, Credit card account(s), etc. Pay your bills and make any payments required to reconcile your accounts.
2) Check your sales tax records
If your company sells products or services in another country, it may be liable for Sales Tax in those countries. Make sure that you have filed all of these returns correctly and on time so that you don’t incur penalties.
Nevertheless, many small businesses do not sell products overseas. In that case, you should check if you have paid sales tax in your state throughout the year.
3) Check your quarterly tax payments
If you are self-employed, you may need to check that all your tax obligations have been honored throughout the year. Many small businesses ignore this and end up owing more tax when they file their final Federal Tax Returns. This is not ideal for your business because it results in costly penalties. So, check if all is in order and keep records safe.
4) You should also review your balance sheet too
The balance sheet is a financial statement that summarizes the balance sheet of a company or individual and how it changes over time.
A balance sheet is one of the three fundamental financial statements. It is used to measure and report on the amount of assets, liabilities, and equity that exist at a specific time. The other two statements are the income statement and the cash flow statement.
The balance sheet provides information about what an individual owns (assets) versus what they owe (liabilities). A company’s assets are listed on one side, while its liabilities are listed on the other side. The difference between these two lists is called net worth or equity.
You should review items such as Uncategorized assets, Accounts receivable, Inventory, Other assets, Accounts payable, 401K liability, and Payroll tax liabilities in your balance sheet.
Getting this information right should eliminate discrepancies that may result in you filing faulty tax returns in the coming tax season.
5) You should also Review your profit and loss
The profit and loss statement is a company’s most important financial document. It is the only one that provides a detailed breakdown of the company’s performance. It is also the most important tool for evaluating what is happening with your business.
The P&L statement, as it’s often called, can be broken down into five parts:
1) Revenue
2) Cost of goods sold
3) Gross margin
4) Expenses and operating costs
5) Income before taxes
While reviewing it, check the items listed above and see if any discrepancies require your attention. Remember, information in your income statement should mirror what’s recorded in your bookkeeping. Your bookkeeping is the input, while the profit and loss or income statement is the output.
6) Other bookkeeping loose ends to review
Below, I give you other loose ends you should review before the year ends.
- Ensure all expenses have a payee
- Review undeposited funds
- Review uncleared transactions
- Reconcile 941’s against bookkeeping records
- Calculate total business mileage (save this for your tax preparer)
- Review your personal banking records looking for business expenses
- Gather W9s in anticipation of generating 1099 MISC and 1099 NEC forms
This could sound like a lot of work, but if you ask me, this is necessary to ensure that your business enters the next year very organized and ready to hit the next stage of growth. It also helps you file accurate tax returns for the year 2022.
Conclusion: What are the Different Ways to Outsource Small Business Bookkeeping Tasks?
There are many reasons a small business owner would want to outsource their bookkeeping tasks. The first and most obvious reason is that it can be time-consuming and tedious to handle all the bookkeeping tasks independently.
It can also be difficult for small business owners to find the time to do it, especially if they have other responsibilities, such as running the company’s day-to-day operations or managing employees.
Another reason small business owners might want to outsource their bookkeeping tasks is that they need a more experienced accountant or someone with more qualifications than they have and don’t want to waste time training them themselves.
Even though I have shown you that there are many different ways to outsource your small business bookkeeping tasks, you should always ensure that you get the best service for your needs and budget.
That is why I recommend you hire my team and me to handle all your bookkeeping. For a small fee, we go beyond your expectations and ensure to protect your business from mistakes. To talk to me, call my office at +1 202-618-1297 or click HERE.
Frequently Asked Questions
- What are the basic bookkeeping procedures?
Basic bookkeeping procedures are (a) analyzing financial transactions and assigning them to specific accounts; (b) writing original journal entries that credit and debit the appropriate accounts; (c) posting entries to ledger accounts; and (d) adjusting entries at the end of each accounting period.
- What should a bookkeeper do weekly?
Bookkeeping is a process of recording transactions, adjusting, and entering the results in books. The process of bookkeeping is done to track the financial activities of a business or organization. It provides an accurate record of all financial transactions and balances.
Bookkeeping can be done manually or electronically with the use of the software.
There are two types of bookkeeping: (1) Cash basis – This type records only what was paid or received in cash; (2) Accrual basis – This type records all income and expenses regardless if they were paid in cash or not.
- What is the golden rule in bookkeeping?
There are three golden rules in accounting (which a bookkeeper is expected to be aware of). These are; (1) Debit the receiver and credit the giver, (2) Debit what comes in and credit what goes out, (3) Debit expenses and losses, and credit income and gains.
- What is the daily routine of a bookkeeper?
As a bookkeeper, you may primarily gather, record, and analyze financial activities on a day-to-day or periodic basis. You will also talk to customers, vendors, and even employees within your company and attend meetings and discuss reports about the finances of the business. You may make calls, write business letters, or send emails. This is how you keep track of financial activity in the business.
