Wrapping up the year (end close).
Year-end sales goals, project deadlines, Q1 preparations... not to mention holiday festivities and events. It’s a busy time of year, and you could use a little help prioritizing tasks for getting your books in order.
One year will be ending and another beginning very soon. While many people focus on holiday celebrations and new year’s resolutions, small business owners also need to focus on year-end business planning — and contemplate what lies ahead.
Managing your finances becomes ever more vital to the health of your business as it grows. Bookkeeping can be time-consuming, even when you know what you’re doing — but, as a business owner, it isn’t something you can ignore. Your company’s success hinges on profitability and positive cash flow. Without bookkeeping, you won’t know if you have either. That’s why, for small businesses, year-end is the perfect time to take stock of your financial fitness while pulling together goals for the year ahead.
As you work through the list, begin to connect the dots between business activities. At the end of the exercise, you should have greater insights into resources, along with some key actions and metrics to achieve in the new year.
By following these steps and staying proactive in managing your finances, you can lay a strong foundation for the year ahead.
1. Examine your financial position. Review your financial statements, such as balance sheets, income statements, and cash flow statements. Financial statements give you a better handle on your overall financial position and how your business is performing.
2. Reconcile bank accounts and credit cards. If you don’t regularly reconcile bank and credit card statements, this is the time to take a closer look. Reconciling accounts ensures that your records match the actual money coming in and going out of your business. Investigate and correct any gaps you may find.
3. Collect outstanding overdue invoices. Keep track of invoices issued to customers and payments received. Follow up on outstanding payments to maintain a healthy cash flow.
4. Reconcile your inventory. Reconciling year-end inventory involves ensuring that the recorded inventory matches the actual physical count. After completing the physical count, compare the results with the inventory records in your system. Identify any discrepancies and make necessary adjustments to your inventory records to reflect the accurate count.
5. Review accounts payable and vendor relationships. Analyze your accounts payable ledger to identify any outstanding payments to vendors. Review contracts and agreements with vendors. Ensure that you’ve met all contractual obligations and evaluate vendor performance.
6. Get the necessary documents ready for your tax accountant. From preparing 1099s or other local taxes, ensure you have accurate information to generate and issue tax forms as required by the IRS.
7. Plan for the year ahead. Take a look at how you got here. Do you need to increase sales? Reduce costs? Hire new employees? Institute more thorough processes? Use the insights gained from your year-end review to improve processes for the upcoming year.
Getting your books in order means ending the year with accurate financial statements — information necessary to gauge how well your business has performed, assess financial health, and predict future success. By following this checklist, you’re well on your way to creating a robust and effective financial strategy that will drive your business forward.
Need support in mastering each of these steps?
Sound financial planning is critical for your business’s success. If you need help, don’t hesitate to reach out at info@thielstyle.com As a fractional CFO, it’s my goal to help you understand what is right for your business and get the financial intelligence you need to make clear and confident decisions.