Your accounting to do list for the end of the calendar year
‘Tis the season to be jolly… until you realize you need to close the books for the year! At least, that is, for those whose fiscal year end coincides with the end of the calendar year. This is most often decided early on and depends on the nature of the business itself. If you fall under this umbrella, it’s important to be on the ball when it comes to closing the books for the year in order to avoid a disorganized and stressful run up to the holidays. Because who wants that?
But what does this actually look like and how can you ensure that nothing slips through the cracks? We run through the to-do’s so you can tick them off one by one, before you ease into the holidays with your feet up, beside a cup of eggnog!
Finalizing your invoices and expenses
The first step to consider is ensuring that all of your invoices and expenses are up to date. Without this information, you would be handling the wrong data in the following steps and it would be a bit of a waste of time. So, make sure all unbilled invoices are sent out and it never hurts to follow them up with a phone call as a little nudge. Having your expenses paid and entered into your accounting software or system is also key here.
Reconciling your accounts
This is where you’ll be reviewing your accounts and comparing them to your bank statements to ensure that all balances are looking as they should. You’ll also want to check for any missing or incorrect transactions and make any necessary corrections. Reconciling your accounts is an important step in the closing process because it ensures that your financial records are accurate. If there are any mistakes in your records, you’ll want to find and correct them as soon as possible so that they don’t end up costing you in extra time and effort later on. If you need help here, you can always hire a professional bookkeeper to do the work for you.
Updating your financial statements
Once you’ve successfully reconciled your accounts and checked them through thoroughly, you’ll be ready to update your financial statements. At this point, you’ll want to go back over your projected performance for the year and compare it to your actual performance for the year. These financial statements will likely include a balance sheet, an income statement, and a cash flow forecast. The purpose of updating these financial statements is to give you a more accurate view of your business’s performance.
Analyzing your business performance
Once you’ve successfully closed your books, you’ll be able to analyze your business performance. This is particularly useful if you’re just starting out and may include a deeper look at your revenue, expenses, and profit margins. This will help you understand how your business is performing so that you can make any necessary adjustments for the coming year.
Making adjustments for next year
There are a few things you’ll want to take into account when making adjustments for the coming year, as they will help you make the most of your business’s potential. For example, you may want to do a review of your customer retention rate. This indicates how likely customers will return to your business. If you notice a low rate of retention, you may want to make a few adjustments to improve it. One way in which this can be achieved is by reviewing your customer complaints and feedback. These insights can provide huge value for the coming year.
Planning your cash flow
Planning your cash flow for the coming year will help you accurately forecast how much cash your business will bring in, as well as how much cash you’ll be spending. When you’re planning your cash flow, you’ll want to make sure that your revenue and expenditures are realistic. A good way to do this is to make sure that your estimated revenue is based on actual numbers from the previous year instead of just being a guess. Your expenses are also likely to be higher at certain times of the year, so you’ll want to make sure that you account for this.
Reviewing your business plan
Finally, after you’ve successfully closed your books and planned your cash flow for the coming year, you’ll want to review your business plan. This is an overview of your business, including your vision, mission, and goals. It will also include a financial forecast and a list of your strengths and weaknesses. You may also want to consider revising it completely if you’ve made significant changes over the past year. A business plan will help you stay on track and make the most of your business’s potential.
Create a budget
Finally, you’ll want to create a budget for the coming year. A budget will help you plan for your expected expenses, as well as your expected income. This is especially important in times like these, where tightening the purse strings is advised as we face financial uncertainty. It’s always best to be as prepared as possible.
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