Year-end Closing Checklist for Small Businesses
This checklist reviews several actions most small- to medium-sized businesses need to take to close out the books and prepare for tax filings.
Review Past-Due Receivables
Check significant past due receivables and determine whether you think customers will eventually pay. You might choose to send past due bills to a collection agency or decide to write them off for a deduction. Leaving large, uncollectible receivables on your books falsely inflates your balance sheet.
Review Credit Balances
Credit balances, which can result from uncashed checks or refunds not issued or claimed, should be reviewed and resolved where possible. Businesses holding unclaimed property owed to an individual or entity must report to the state where the recipient resides. These escheatment laws vary by state, though all require annual reporting of unclaimed property.
Review Your Inventory
If your business involves selling of goods, then you should review your current inventory to determine the value of items not sold. Remove any unsellable inventory to avoid overstating your inventory balance and paying extra taxes that you do not owe.
Prepare W-2 and 1099 Forms
By January 31 you must report to the Internal Revenue Service and people who worked for you the annual earnings of your employees using Form W-2. A 1099-MISC form must be provided for independent contractors and vendors who earned $600 or more in the year. If you have not already done so, gather Form W-9 from these vendors to facilitate completion of the required 1099 forms.
Consult With Your Tax Advisor
The Tax Cuts and Jobs Act enacted by Congress in December 2017 brought several tax reforms that affect businesses. Consult with your tax advisor before year-end to assess what changes impact you and determine whether any actions are required. For example, you might qualify for the employer credit for paid family and medical leave if you are an eligible employer and you set up or amend a qualifying paid family leave program.
Audit Your Vendors
One of the significant factors contributing to your business’s financial health is the cost of goods and services. You can control these costs by choosing vendors with more favorable pricing, for example. Review contracts with suppliers and vendors. Reach out to those you intend to use in the next year and attempt to negotiate lower rates.Assess Profit and Loss Statements
A profit and loss statement provides a snapshot of your business’s performance in terms of revenue and expenses. Making comparisons to statements from other time periods can be useful. A review of your business’s profit and loss statement can help identify areas that are underperforming or categories of expenses that are too high.Download Documents and Data
To protect against data loss and changes in accounting software and to more easily retrieve year-specific information for tax filings or in case of audit, organize and backup relevant reports and information.
- Export all data in your accounting system, both in the software format and in CSV format for importing into other software versions in the future.
- Run accounting reports and save as PDF. Include a profit and loss statement for the period January 1 through December 31, detail of every transaction during that period and a balance sheet from January 1 and one from December 31.
- Save PDF reports of payroll details for each employee for the year as well as payroll tax filings.
- Download PDF reports of online transactions, credit card statements, utility bills and similar.