Running a small business is hard. At the end of the year, it gets even more complicated. Now is the time to prepare your financial reports and data for 2018 and the upcoming tax season. Use our simple small business year end checklist to make sure your business is ready. Follow these 9 steps!
1. Count your inventory.
In a product-centric business, inventory is incredibly important. Now is the time to count your inventory and make sure you are able to provide your tax preparer with the following information.
- The inventory balance as of 1/1/17 and 12/31/17
- The cost of all purchased inventory during the year
- The amount of sold inventory during the year
Counting inventory early will also give you ample time to investigate if there are any discrepancies in your records.
2. Run standard financial reports.
The end of the year is the best time to get a full financial picture of your business’ health. Pay special attention to these reports, whether you use accounting software or manual spreadsheets.
- Profit and loss report – This report will tell you how much money you’ve made this year, what your financial outlook is, and whether you have money in the budget to invest in more assets.
- Balance sheet – This sheet shows what the business owns, what the business owes, and what the business is worth.
- Cash flow statement – This statement will show how your money was spent throughout the year, whether through operating, investing, or financial activities.
These financial reports will prepare you for filing taxes, creating business-oriented goals, budgeting for future expenses, and more. If you’re unsure of how to create these reports, consider outsourcing your accounting needs.
3. Organize receipts for tax-time.
Depending on the size of your business, you may not track receipts on a specialized software system. Collect and organize your paper receipts before the end of the year. This will lessen the burden come tax season for both you and your tax preparer.
4. Audit your vendor information.
Is all of your vendor information correct? Comb through your vendor list and double-check that you have all of the correct contact information, like emails and phone numbers. Plus, delete inactive vendors from your files. If you find an inactive vendor with the potential to become active again, create a game-plan to make that happen before the end of the year.
5. Make necessary corrections to payroll.
It’s estimated that 40% of small businesses are fined about $845 annually for IRS penalties relating to payroll. Account for all taxable fringe benefits before the end of the year. These could include:
- Education reimbursement
- Health insurance
- Life insurance
- 3rd party sick pay
- Company cars
Don’t forget to budget for an end-of-year bonus or incentive, and decide whether that bonus will appear in the 2017 or 2018 payroll. It will make a difference in your profit reports and tax preparation.
6. Reconcile your accounts receivable.
Start collecting any unpaid invoices or outstanding payments from clients now. Make it your goal to have all accounts receivable reconciled before the start of the new year. This will improve your financial reports and prevent any cash flow crises.
7. Back up vital business data.
Do you follow the 2:1 rule? Experts recommend keeping vital data in at least two, separate digital locations, and another physical copy for your records. You could use external hard drives or even cloud-based software to back up your business data.
Don’t forget to download documents and reports that may be located in only one spot, like a QuickBooks report. Once you download the report from that cloud-system, save it to an external hard drive and print a copy for a physical record.
Financial reports are not the only vital business data – where do you store contact data? Whether they are customers or vendors, you need to make sure you have their contact information in more than one place. If that means keeping an old-fashioned Rolodex, that works!
8. Adopt a file-naming system.
If you don’t already have a naming system in place, there’s no time like the present. As your business grows, so will the number of files. You need to ensure that these files will be simple to locate no matter what year or client they relate to.
Good example: 2015ClientReportV05
Bad example: Client_report_5_2015
Stanford University has actually put together a guide for file naming best practices. Read it here.
9. Examine 2017 goals and create 2018 goals.
Now that you’ve evaluated every financial aspect of your business, it’s the perfect time to determine whether you’ve met your 2017 goals. You can then use your success or failure to create 2018 goals.
Consider sharing your successes with your employees. If you’ve met particular goals, your employees will enjoy hearing their part in the business’ accomplishments.
Sign up for our newsletter
As a small business owner, it can be difficult to keep up with financial best practices. Sign up for our free newsletter to get updates about accounting, taxes, and more. Sign up now!