Year-end Accounting Tips for Small Businesses

It is the most wonderful time of the year again, time for holidays, parties, sparking light, and decorations. With holidays just around the corner, this could be the busiest time of the fiscal year, especially if you are a small business owner. This wonderful time of the year can quickly turn into a nightmare of rush and confusion for small businesses because of one little phrase: year-end accounting. 

To help you gain control of your year-end accounting, we have eight tips to get your small business ready for the year 2022 before it becomes a reality. These accounting tips for small businesses can help you figure out long-term goals, avoid overlooking errors, save time, and will allow you to prepare for your year-end accounting process.

Before the year-end, you need to complete several accounting tasks. It is important for all small business owners that your accounting books are organized, up-to-date, and ready for the transition into a new year, so you not only put a cap to this year but begin preparing for the next year.

Before we dive into the tips to manage your year-end accounting, let’s first understand end-of-year accounting and why it is important for your small business. Year-end, also known as accounting reference date, is the completion of an accounting period for a company. A fiscal year-end is any period of 12 consecutive months. End-of-year  accounting is a set of procedures performed at the end of a company’s financial year. It is performed to find and correct errors from the previous year and run financial statements, and is crucial for preparing for tax time. 

What should year-end accounting procedures achieve? 

1. Verify that financial statements prepared at the end of the year contain true and fair information. 

2. Ensure that all the items of income and expenditure are recorded on an accrual basis. 

3. Help you detect errors in the books of accounting kept throughout the year. 

4. Ensure that the ledger balances transferred from one financial year to another are accurate. 

One of the most crucial steps to begin with year-end accounting is to ensure that all your invoices are documented on time and are up-to-date. Sending regular invoices to your customers throughout the year can improve the cash flow for your small business and save time with year-end accounting. 

If you are still waiting to send unbilled invoices, don’t wait any longer. Send all of them now, so you are ready to begin your year-end accounting process. 

2. Send Invoice Reminders Before Year-End Accounting Begins 

Dealing with clients who don’t pay bills on time can be challenging. To ensure that you are not left with a load of unpaid invoices and are on top of your cash flow, follow up with your clients regularly. It would save you a lot of last-minute hassle while you are struggling with managing your year-end accounting books. Year-end is particularly a great time to remind clients about overdue bills because clients are looking to reduce their taxes and paying outstanding bills will do exactly that.

3. Write off Unpaid Invoices as Bad Debt 

Unfortunately, not all your clients are going to pay you. Especially if you are a small business owner,  you may have to deal with this situation quite a number of times in the beginning. However, don’t be discouraged and write off all these unpaid invoices as bad debt. Documenting this record on time would help you avoid similar clients in the future and can help you learn a thing or two about successfully running your business in the future.  

4. Record Your Expenses 

For small business owners, especially if you have just started, you have to manage a number of things throughout the year. So, there can be nothing more stressful than shuffling receipts, bank statements, and invoices to get your finances in order. Rushing through them at the end of the year doesn’t just increase the work for you, but you also run the risk of making errors, or missing out from adding important information. To avoid this, start recording your expenses at the beginning of your fiscal year. If you are new to the business, you can outsource it to professional accounting services that can make your job easier.   

5. Create Profit and Loss Statements for Year-End Accounting 

To know how your business is performing, you need to maintain profit and loss statements. It can also help you with year-end tax strategies that may help your business. You can do this monthly, quarterly, or yearly to avoid doing it all during the year-end accounting. By keeping track of your small business, you can evaluate the health of your business and can also plan how to grow it in the future.   

Accounts receivable is essential to calculate the business income and profit rate. It allows you to assess the cash flow of your small business and make plans for future sales. It is a skill that all small business owners should know to ensure consistent business cash flow. However, this can be challenging if you are new to the business. To make sure your small business keeps growing, you can seek help from outsourced bookkeepers that manages your account receivables for you. 

If you are a small business owner, it is always best to plan ahead. Creating a reasonable budget for your business before the next year starts can help your business function effectively. One of the major expenses that you must account for is taxes. You should file your taxes on time to avoid year-end penalties and losses to your business. 

8. Consider Hiring a Professional Accountant  

These tips can help you with the year-end accounting for your small business. But if you are new to the business, you may have a lot on your plate than you can handle. For this, you can consider outsourced bookkeeping. Accounting experts like Maxim Liberty, delivering bookkeeping and accounting services to CPAs and businesses in USA and Canada for over 16 years, can help you manage all your year-end accountings for you. Click here to make your life easier today!