As 2020 comes to end, accountants across the world will work overtime to close out their client’s books. This task has to be completed for the tax returns to be prepared on time. For many small businesses and nonprofits, they may not have an accountant who will close out their books. With virtual school, working from home, and the holidays it might be easy to forget a task in the year end process. Missing a year end task can cost you time and money. It is a challenge to know where to start.
Closing the books means ensuring transactions are properly categorized. Adjusting entries will need to be performed. During this process the financial data is being reviewed for errors or missing data.
The list below provides business tasks to complete to ensure a smooth tax season:
- Contact your tax professional to discuss your current tax strategy.
- Create a cash flow statement for the remainder of the year.
- Reconcile bank and credit card accounts.
- Reconcile accounts receivable to verify if there are unpaid invoices.
- Reconcile accounts payable to verify if there are unpaid bills.
- Run standard financial reports such as a balance sheet, and a profit and loss statement. This helps to verify if transactions look consistent and that there are no negative balances.
- Collect W-9 forms for 1099 vendors.
- Verify all employee information before W-2s are issued.
- Request that staff submit all their reimbursements.
- Double check payroll and benefits to ensure they are properly recorded and paid.
- Conduct a physical inventory.
- Update grant schedule to verify remaining dollars to be spent.
- Update donor database with addresses and donations.
- Save bank statements, credit card statements, payroll reports, loan statements.
- Download the year’s general ledger, trial balance, profit and loss statement, balance sheet, accounts receivables, and accounts payables.
- Upload the new year budget into accounting software.
- Clean up your organization’s directory.
- Perform business planning for the next year by setting goals and action plan.
- Lock the period in your accounting software so the year’s data can not be edited.
Year End tasks are key to creating accurate financial statements and to get your financial books in order. If you are organized throughout the year closing out the year runs smoothly. If you are a business owner or nonprofit leader you should ensure your accountant performs year end tasks to ensure the tax returns are properly created. Closing out the year is a major undertaking for any organization. If you utilize a checklist the process can be manageable.
Don’t be overwhelmed by the list. Work through each task at a time. If you are still confused on where to start, reach out to an accounting professional to help you make sense of your accounting and year end.