Review profits & losses
The first thing you should do after this checklist is review your profit and loss statement. It’s a good practice to see how you’re spending your money and if your expenses are categorized. If you haven’t already, you may want to reconcile your bank accounts and receipts.
Did you use vendors this year? If so, you’ll have to collect W-9 forms for some of them. The W-9 form can be used as a paper trail for the IRS to track your expenses. It’s also a way for the government to keep track of vendors and their income.
Remember, for every vendor for whom you’ve paid $600 or more for services, you’re required by law to issue and complete a 1099 form. The 1099 must be filled out and submitted to the IRS by January 31st (this deadline includes forms filed electronically). Fortunately, your accounting software solution will likely have a line item for all 1099 vendors and contractors.
Gather and organize your receipts
It’s important to gather and organize your receipts so you can share them with your accountant. An easy way to organize them is to use a software solution that syncs with your credit card or bank account. That should help you account and categorize many of your expenses, which will help you reconcile your paper receipts. Be sure to make copies of your thermal receipts, because they have a tendency to fade, too.
Fortunately, if you use an online accounting provider like Xero or QuickBooks Online, they can sync directly with your bank account or credit card statement and help you categorize your expenses.
Reconcile your bank accounts and credit cards
For the year-end, it’s important to make sure what you have in your monthly financial statements matches up with your bank and credit card accounts and your year-end statements. If you are using online accounting software, it’s important that your ledger balance matches as well.
Check your payroll
A few common areas to double check during end-of-year accounting include withholding taxes for fringe benefits, deferred compensation, and end-of-year bonuses.
Grant year-end bonuses (if any) Appreciate your team! There are always a few loose strings at the end of the year you’ll want to watch out for. In particular, the end of year is a popular time to give bonuses. The end of year is a great time to appreciate your team. If you plan on giving employees bonuses at the end of year, be sure the bonus has its taxes withheld.
Take physical inventory
For some of you, there’s no need to take physical inventory. For others, getting an accurate account of your inventory is important. You’ll want to match it with your end-of-year balance sheet. It’ll also be important for your accountant to know how much you’ve spent on inventory throughout the year and its current value.