We caught up with staff accountant, Taiya Anderson, to find out her year-end checklist for businesses, perfected over her 30 years managing books.
1. Keep Accounting Records Up-to-Date
Taiya says this is the most important thing. “The larger your company, the better it is to have a look at it every month.” Compile records and balance accounts. Make sure all transactions are accounted for between credit card and bank statements. Her pro tip is to let QuickBooks do the work and download all transactions.
2. Review Financial Statements
“Go through item by item monthly and make sure everything’s in the right place.” Taiya explained this provides an accurate representation of profit versus loss. “Make sure you look at every item.” Don’t forget to pay yourself.
3. Tie Up Payroll Loose Ends
Collect straggler W-9 forms. Send out W-2s to all employees and 1099 forms to any non-employee contractor who was paid $600 or more. Taiya recommends businesses get W-9 forms before paying anyone for two reasons: 1) short-term employees can be hard to track down after the fact, and 2) W-9s provide information on the type of entity being hired, i.e., sole proprietor versus a corporation. 1099s only go to unincorporated, independent contractors, sole proprietors, partnerships or LLCs.
4. Review Accounts Payable and Accounts Receivable
“If you have someone you’ve done work for and they haven’t paid you, now’s the time to call them up. If you feel this person is not going to pay you, communicate that to your accountant so it can be taken off net income at the end of the year.” Review those vendor statements! “Your year-end statement should equal what’s in your books. “If you’ve talked to your accountant and are going to have a profit at end of year, pay bills sitting around to lower tax liability. Paying those bills early gives you a tax advantage.”
5. Take Physical Inventory
Count every single item and record the totals.
6. Make a Tax Planning Appointment
When all the above is in order, it’s time to see a tax planner. They can provide individualized advice on how to reduce tax liability. “For example, if one has net income at the end of the year, now’s the time to buy another vehicle or purchase inventory.” An accountant can also advise when that’s not a good idea.
7. Take a Moment to Reflect
Afterward, it’s time to start planning for next year, so take time to reflect on what goals were met this year, what went well, what didn’t and where the bar should be set for the upcoming year.
It can be a lot to tackle on one’s own—that’s where a good bookkeeper comes in. “It’s something most people don’t want to do, but are also reluctant to pay for,” Taiya says, adding that there’s a valuable tradeoff in farming out business accounting to a professional. “It allows talented business owners to focus on what they do best.”
If you’re looking for a year-end checklist for individuals, check out this guidance: https://www.thestreet.com/retirement-daily/your-money/year-end-tax-planning#gid=ci02ac1f69b00026f9&pid=ask-the-hammer-investments-real-estate-and-capital-gains-tax