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When it comes to small and medium-sized businesses, compiling an annual accounting checklist takes center stage. An accurate year-end accounting review allows business owners to review the financial report and make financial projections for the next year.
In order to generate a financial report, business owners have to go through various accounting processes to make the right financial decisions. Today, more and more businesses want to perfect their year-end accounting checklist to create accurate financial reports.
Before you jump on the annual accounting checklist, make sure your bookkeeping is up-to-date and accurate. Think of it as a starting point to transition to the next financial year smoothly. Essentially, you should be able to differentiate between the bookkeeping and accounting requirements.
It is vital to understand that accounting follows the lead of bookkeeping records. Therefore, it is of paramount importance to ensure your bookkeeping transaction records and data entries are in order. For the sake of accuracy, you should double-check transactions that may be incorrect.
Despite what transaction you check, your objective must be to match your ledger balance. Ideally, you should check all items from your income statement and balance sheet to check the accuracy of transactions.
Your next item on the checklist should be to review your accounts receivables. Naturally, you want to collect the amount clients owe to you and generate more revenue by the end of the year. For instance, you should check a list of unpaid invoices and create a structured list. The column that highlights old invoices will help you spot errors. Therefore, look for any suspicious items throughout the invoices.
Thorough check-and-balance of the income statement and balance sheet will help you understand your business performance. Most business owners set the criteria for annual performance. If you exceed your financial expectations, you can opt for more ambitious financial performance in the next year.
A better understanding of financial statements helps you create accurate financial forecasts. With a profit & loss statement, you can make future revenue-based projections from expected income and past sales. You can always double-check your income statement and balance sheet to spot any errors.
You need to look out for the amount that doesn’t match the ledger. The earlier you spot these mistakes, the sooner you can resolve your financial statement issues. Also, check negative balances, substantial account balances, and balances with high or low variations from the last year.
You cannot separate your payroll records from payroll accounting. Ultimately, efficient payroll management helps you accrue payable wages and salaries to employees. Remember, the amount of all earned salaries of employees is a liability at the end of the financial year.
For starters, make sure there is no incorrect or missing information on your employees’ W-2 Form. Also, make sure the Social Security number is accurate to avoid penalties in the foreseeable future. In hindsight, you have to ensure a thorough record and balance of all paychecks of the current year. Apply the same rules if you have to add bonuses and commissions to specific employees.
When it comes to bonuses and benefits, it turns an employee’s salary into a high tax bracket for a given period. Therefore, take into account all the federal, local, and state tax implications prior to adding the bonus into an employee’s pay.
The year-end accounting checklist is the time of year when you can reflect and reevaluate your financial objectives. You should be optimistic and passionate to analyze the next high step for your business. For instance, ask yourself what your business did right and wrong for the current fiscal year.
You need to ask yourself if your business was able to complete the financial goals of the current year. Also, don’t answer and brainstorm these questions. It would be better to note down new information and ideas that can help you reflect your financial position better at the end of the year.
If your business has physical inventory, make sure to complete the count by the end of the year. Many businesses maintain an online inventory for their physical products, which makes it easier to count. Similarly, note the value of available inventory, and include any damages in the form of theft.
Organized classification of receipts can help you save a lot of trouble. The organized receipts will help you file errorless tax returns at the end of the year. Even if you input receipts online, make sure to organize them in chronological order.
The year-end tax planning serves as an opportunity for business owners to take advantage of tax cuts and save money. For instance, if you intend to increase your total expenses, make sure to decrease your taxable income at the end of the year.
Similarly, you should hold onto outstanding invoices until the end of January. The more you defer invoices, the more ability you will gain to lower your current year’s taxable income. Of course, you can always step up your tax planning game and seek the services of a professional tax specialist to conduct in-depth financial analysis. It’s the most efficient and effective way to improve your current tax plan.
Most business owners prefer outsourced accounting services to pay attention to other business activities. In any case, it is undeniable that a comprehensive year-end accounting checklist can drive growth and help businesses establish a better market position.
Remember, you don’t necessarily have to check every aspect of your annual accounting checklist. Instead, understand the extent of your business operations and then create an accounting checklist. As a business owner, you can create the initial accounting checklist on your own, but leave the implementation of the accounting checklist to professional accountants.