Year-End Accounting Checklist for Small Business Owners
As we find ourselves hurtling towards the end of the year, there are a number of things you should be staying on top of in order to best manage your company finances and position your small business for greater success in the new year.
Your year-end thought process should take into consideration the following:
Make sure you’re filing all of your forms and making payments. It’s important to make sure you’re in good shape to get your employees their W-2 forms on time. Also take into account accrued bonuses or special gifts on the books that may not be paid until next year.
You want to be able to close out all outstanding receivables before year-end, so do what you can to collect on unpaid bills. Improving your collection process and expediting payments will help you maintain better control over your cash flow.
If your financials aren’t already GAAP compliant — that is, in line with generally accepted accounting principles — then now is the time to move in that direction. If seeking a funding round or selling your business is on the horizon, you’ll need clean books to satisfy investors and/or acquiring companies.
It’s best to stay on top of the 1099 process throughout the year. After all, employees are going to claim income whether you get them a 1099 or not, so you might as well save yourself the hassle and get it to them.
You should collect 1099s as you go. It’s easier that way, rather than waiting until the end of the year to figure out who you need to file for and trying to chase them down before year’s end. If you find yourself behind the eight ball in terms of 1099s, keep in mind the due dates for filing: 1099s to recipients on or before January 31, 2014 and to the IRS on or before February 28, 2014 (or March 31, 2014 if you’re filing electronically).
Reconcile transactions and cash checks
Reissue checks as needed and void as needed. You want to make sure all of the transactions in your register are reconciled so that you have a clean tax return.
Income tax planning
Now’s the time to start identifying your tax needs, thinking about potential tax savings and engaging with your tax professional so they can identify ways to minimize your taxes. Starting your estimates now will save you from unwelcome surprises come tax time.
The end of the year isn’t necessarily the best time for you to get a valuation. If it’s been less than 12 months since your last one and you haven’t had any events to trigger needing a new one, you can take this off of your to do list.
But keep in mind that a 409A valuation refresh is required annually. You’ll also need a valuation if you’re trying to value the common stock of your company, planning to issue stock options, have raised a new round of funding, had a material event or are looking to sell IP from your company to another.
Assess internal controls
Check to see that you have internal controls in place and that they’re working properly. Keep your eyes peeled for weak spots where the potential for fraud or errors runs high.
Examine your business processes to see if and where you can find any opportunities to cut expenses for savings in the new year.
As you reflect back over the past year, it’s nice to take a moment to dig yourself out from under the minutiae of running a business and think big picture. Refine your vision. Map out your next milestones. What have you been doing well? Where does your company need work? Is it time to pivot?
The end of the year is a great time to reflect, to informally audit your business and to make plans for next year, which includes financial forecasts and budgets. (Click here to Tweet this thought.) Checking off all of the items on this list will help you start the new year with clean financials and a good reading on where your company is currently and where it’s heading.
This post originally appeared on the author’s blog.
David Ehrenberg is the founder and CEO of Early Growth Financial Services, an outsourced financial services firm that provides early-stage companies with three platforms of financial support: day-to-day transactional accounting, CFO service and tax and valuation compliance. He’s a financial expert and startup mentor whose passion is helping businesses focus on what they do best. Follow David @EarlyGrowthFS.
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