Year End Checklist for Small Business Owners

Year-end Approaches! You must be in hurry to catch up the Financial Position of your business

Throughout the year everyone in the business involved and busy in the Operating activities even the Accountant. In this situation small business owners start looking at their Books of Accounts as there are still some tasks pending or even the bookkeeping process haven’t started yet as the single owner were too busy working days and nights for his business operations so when he looks that year-end is approaching he got some new task to do.

The Accounting of the business, the main thing that will allow him to assess his business current financial position and will be aid to take future decisions and investment planning.

Financial Needs of each business differs as of the nature of the business and legal needs differs because of the way it is incorporated, for the year-end everyone is focused on tax preparation or some similar tasks but don’t forget to forecast or estimate what is going to happen in the foreseeable future as filing taxes or making returns is the matter of time but your business prosperity and the resourcefulness in the utilization of the business resources is hell lot more important than to file taxes. I am not clearly saying that taxes aren’t the activity which is needed to be concerned at the year-end it need your attention but it just an activity and for that activity you just have to maintain or make your accounts good enough so that it can satisfy the requirements of Taxation Authority (IRS and State Authority in USA. HMRC in UK and ATO in Australia) but they must be in good manner or according to the underlying principle in order to get satisfied from the Taxation Authorities.
Let me say I am a businessman and my year-end approaches you know what I got two things in my mind Taxes and Financial Statements,

Well these are just two words in writing but a hell of work to do in reality,
You know I will use the term “Events” to describe my idea here, events are the occasions where business witnessed a change in its Financial Position, a change can be in the form of a reduction or increment in resources, for a small business it is always the case that the events occurs one after the other but no one looks into them or how they affect the financial position of the business, but there comes a time when you have to look back and see what you have done or achieved in terms of business in the past due period of your business life, was that good enough to satisfy your objective needs or your goals or it demands more improvement? That also depends upon the attitude of your objective or more precisely the business plan you formed underlying your resources,
You know many people asked me what is the most important thing in life, what I say is Time management when you taking an exam and precision when you are going to hit a curve ball, but in terms of business it is always the resource management because we could be saying that resources are the limiting factors but I always say it is resourcefulness which limits you not the resources.

I have maintained a list for a small business that will help the Owner to prioritize the work on year-end.

Gather your all source documents in one place

Source Documents like Checking and credit card statements, Invoices, Bills and Receipts.

Update Book of Accounts:

  • First of all Create a Chart of Accounts,
    I have seen that business owners start doing the Entries and they don’t create a meaningful chart of account, as bookkeeping is the prime function for this whole process Making Chart of Account is the Prime function in Bookkeeping, so you must ask your Accountant to create a meaningful and proper chart of Accounts for your business accounting process,
  • There are Five Elements of Financial Statements i.e. (Assets, Liabilities, Equity Expenses and Income). First three related with Balance Sheet and determine the Financial Position of the business and the latter two determine the Profit Figure which is an essential part of the Balance Sheet and in determining the financial position of the business.
  • Enter each and every transaction Chronologically (date-wise), some of the vendors provide separate statements for the items bought from them let’s say you are a constructions business and you buy material used in construction from Home Depot than Home depot provide a monthly statement to its each customer which shows the Name and Amount of each material or a product purchased it will also help you in importing the transactions at once directly into your QBO Account.

Make your Books of Accounts Up to date and make sure that each and every single transaction have been entered in them, review all the transactions with the balances of Accounts, ask your accountant to see what is the good practice to check for the Balances in the Accounts, Make Control Accounts and look in your Trial Balance (List of Balances) if there any discrepancy existed.

Manage your Cash:

Don’t use the same Credit card for your business and personal expenses, and if you have done than you must tell your accountant that which transaction is personal expenses and which is your business expenses, if you have few hundred transactions in the whole year than it is easy to determine but if you have more than that than it is not a good practice to follow and Taxation Authority can also challenge for this,

Load all the Checking and Credit Transactions into the Quickbooks and do the following tasks.

  • Categorize them
  • Reconcile the Balances

Create Cash Projections:

For some businesses Cash Projections are important as Blood to the Human Body such like, (Restaurants, Super Stores, Retailing of Small objects, Stationery dealing), mostly in the case when you are dealing with a combination of products and you are selling Large amount of very small products your business need cash at every moment and the Liquidity of that business is all that is the running the business instead it is making profit or loss.

Well! If your business is of such nature that you have to make payments of small amount to large number of suppliers than you must ask your accountant to make a Cash projection to follow it in the future.

Draft of Financial Statements:

Create First Draft of Financial Statements it will also depend on the statutory requirement of your business, Make drafts of the following:

a). Income Statement
b). Balance Sheet
c). Cash Flow Statement

After you have done the above mentioned things then you must follow the following steps as you are ready now to go through the closing process and year-end situation.

Determine the Estimated Tax Payments:

Calculate the amount of Estimated tax Payments if you have paid within the year for yourself or on the behalf of your business it will help you to determine your tax liability and in making the first draft of your tax return and will aid to estimate the tax liability for the year.

If you have Employees than follow the step 7 and 8 also. And if you don’t have employees then skip ‘em.

Determine Payroll Tax Withheld:

If you have employees, than determine the amount of Payroll Tax Liabilities and the amount you have paid already during the year as your payroll tax.

Review Annual Entitlements:

Review your Annual Entitlements, try to convince staff to take regular leaves. Avoid a large amount of entitlements.

Accelerate your Receivable Management: (This should be taken 3 months prior)

While your year-end approaches and you have Receivables meanwhile you sell on credit than it is the Practice of good and successful entrepreneurs that you should accelerate the Receivables Management, for this you just do follow these steps:

The Assumptions are based that you should start it (3 months prior) of your year-end,

a). Determine the Overdue Invoices
b). Reach your Customers with overdue invoices and Recover the debts from them.
c). Start giving your Credit Customers a feasible amount of discounts on Invoices to convince them to pay you early.

Well if it looks like that receiving the debts from the Receivables while the year-end approaches will increase your amount of cash and hence the tax liability, but it will not because the tax liability is determine by the amount of your business profit not the amount of cash.

Stock Taking:

Reconcile your Stock Accounts and personally take the Stock and make sure each and every amount in it is Balanced with the amounts on the Stock Account.

Determine Payables Management:

Determine the Bills Overdue which you owe to your Suppliers, and as you accelerate your Receivables Management and trying to buy Inventory from the recovered amounts also pay your own debts meanwhile Suppliers. Ask your accountant to optimize the amount to spent between your Inventory and paying your Payables make a true “Working Capital Optimization Plan”.

Office Equipment Account:

Review your Office Equipment stock and reconcile it if there is any discrepancy.
Follow the above mentioned Steps at the year-end and prioritize your Work according to them so you can get over with the Year-end responsibilities.

Following table will be for some important dates regarding Taxation issues:

USA (Federal Tax Authority (IRS)
Federal Tax Year in USA Dec 31st
Return Submission Date April 15
UK (HMRC)
Tax Year April 5th
Return Submission Date Oct 31st
Australia (ATO)
Tax Year June 30th
Return Submission Date  Oct 31st
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