Year End Planning

Updated: Sep 23




It's that time again!


Now that we are firmly in the last Quarter of the year, it is time to start looking forward to the end of the year.


Although your fiscal year may not line up with the calendar year, closing your books properly is still a very important task. It “locks in” your data and ensures you aren’t entering information into the incorrect period, account, or financial report. This happens a lot and doing a proper year-end close is the easiest way to avoid this issue and to ensure you maximize your tax deductions.

However, scrambling to close your books in the midst of the holiday season is usually a recipe for errors. We suggest a structured plan to prepare for your year-end close in QuickBooks with your bookkeeper and CPA in the conversation.


Although reaching the end of another fiscal year is a reason to celebrate, there are additional bookkeeping processes that need to be checked off your to-do list. QuickBooks & your bookkeeper can help save you valuable man-hours due to built-in features for organizing your books. This will translate into a stress-free tax season in April.


Book a Meeting with your Bookkeeper & Tax Professional

The best way to ensure you cover your bases is to get some time scheduled with the professionals you trust before the year ends. Remember, the smart business owners will schedule these appointments early so your advisors may already have their calendars booked up before year-end. There are also holidays and office closures to think about so be sure to get your appointments booked earlier on. If you are a subscription member at A Bigger Bottom Line, simply call our office or click this link to book a meeting. You can also ask us to include your CPA in both Liscio and QuickBooks Online so we can start having electronic conversations in a secure environment to begin the planning process. If you are not a member and would like to learn more about A Bigger Bottom Line and how we can help you this year with your tax planning, click here to book a Free 20-minute consultation. Be sure to act now before the best times and dates are picked off.

Reconcile Your Balance Sheets As dull as it may sound, you have to make sure all account reconciliations are complete and cleared of any old transactions. You need to be able to validate any invoice or credit payment (negative amounts) appearing on the accounts receivable and accounts payable detail reports, and ensure that your previous balance sheet and tax return are a match. If you have not already sent your bookkeeper your tax return from last year, be sure to get that over to them asap.


Review your Profit & Loss

Does the total Income amount look right? How about the total Cost of Goods Sold and Expenses? Do you see any negative amounts in any accounts? Can you spot any accounts that may be duplicated and need to be consolidated into one? Are any transactions miscoded to the wrong account? What's in the 'UnCategorized' or 'Ask My Accountant' accounts? These are the questions that all good bookkeepers ask when reviewing the Profit and Loss financials. These are the same questions every business owner should be asking themselves at year-end (and throughout the year) when reviewing their Profit & Loss statement. If the numbers don't look like a true reflection of your business then it's time to "drill down" into each account to identify why certain transactions look the way they do. Having a bookkeeper look over things with you is the best way to get the results you need as they can navigate the software of QuickBooks for you while also helping you to navigate the accounting side of things as well as it all related to debts, credits, and the most appropriate accounts to choose from.

Reconcile Your Bank, Credit Card, & Loan Accounts It is important to go through your bank statements on a regular basis and ensure there is a matching transaction in QuickBooks for each. It also ensures that the bank and/or credit card company have not made mistakes. It is also a good way to root out any ongoing charges that you may not want to carry into the new year. By reviewing your statements you can also look for online products, trade publications, or membership organizations that are re-occurring. If these are no longer important to your business then this is a good time to cancel them and recoup the savings. Also, if you have any loans you'll want to be sure that the interest has been recorded on these properly to your P&L. Only your monthly or year-end loan statements will properly show the total interest paid out and principle portion so be sure to get these statements. If you have a subscription with A Bigger Bottom Line, then we are already doing this for you monthly as your bookkeeping team - so long as you've supplied us with all your statements on time (and any check and deposit images we've asked for). If you are not regularly supplying your bookkeeper with statements, check images, and deposits, then be sure you get these documents over to them right away in order to ensure that your books are in order. Otherwise, you may see a lot of transactions hitting your "Uncategorized Transactions" or "Ask my Accountant" accounts. This can throw off the numbers across all your financials so be sure to provide feedback to identify what they relate to. If you are a client of A Bigger Bottom Line, check your Liscio TASKS as we likely have some list there (in Google Sheets) where you can provide us with your feedback outside of QuickBooks. Then we'll handle the updates for you in QuickBooks so you don't have any fear of messing up any of these past transactions or having to bother with the updates yourself.

Schedule A Physical Inventory's You will want to take stock of everything you have on hand as of the LAST DAY OF THE YEAR so that you enter the next fiscal year knowing how much money you have tied up in inventory. The value of your inventory on hand as of the last day of the year is the most important number to give your CPA and Bookkeeper. You can also check for losses, determine upcoming promos based on stock availability, and true up your inventory with your books.

Project Income or Losses for Tax Planning Good bookkeeping records and some advisory services can help you forecast your business’ activity for the new year by carefully analyzing your accounting records. The best time to do this is in the last quarter of the year, as there are several tax planning activities that need to be reviewed in advance BEFORE you do these projections (otherwise it's garbage in garbage out advice). Creating a profit and loss forecast is important because it gives your business a plan base to bring in more revenue and attract future investments. It also allows you to plan for tax season ahead of time and maximize your savings. We can make use of QuickBooks’ customized report feature to identify the areas of your business that need adjustments and we can connect other 3rd party applications that do this even better than QuickBooks for more advanced forecasting. For example, we can look at how much it would cost to take on a new sales rep and see how much profit that might produce as well, or what impact buying a new truck might have. It’s a great way to stay up to date with your business’s financial performance while keeping track of your own evaluations.

Verify Your Customer Accounts (Accounts Receivable) Clear up your books by going through all your customer files. If you have customers who are late on their payments this can take a toll on your balance sheet at the end of the year. The Aging A/R Summary will show you, at-a-glance, who owes you money and how past due they are. If your goal is to have everyone paid up by the end of the year we suggest beginning your outreach to them at least 60 days prior to your year-end close. Otherwise, they can take a huge toll on your balance sheet. A negative balance on your Accounts Receivable report could mean that an invoice is missing, the amount is wrong, or your customer overpaid you and has a credit balance. Verifying all the transactions in your Accounts Receivable report ensures that these issues don't continue to linger into next year and cause more costly bookkeeping fixes down the road. Your Accounts Receivable report should be crystal clear and should be a true reflection of the money that is owed to your company from your customers. If not, it's time to get it cleaned up before year-end. Then you can send your customers a statement of all open invoices they owe to you and that will speed up collections at year-end. Get help from a pro if you have questions.


Verify your Vendor Accounts (Accounts Payable)

The A/P Aging summary and UnPaid Bills report are useful tools in identifying which vendors you owe money to. If you spot any bills that are open on these reports that you think have already been paid, then you need to determine why these bills are still open. Maybe there's a duplicate? Maybe the amount changed? Maybe they paid via an Expense transaction that has not been converted into a Bill Payment. Maybe the bill is truly still open. One way to resolve these issues is to ask your vendor for a statement of account so you can see, from their point of view, of which bills they have on their records as paid and un-paid. Give these statements to your bookkeeper or review them yourself to reconcile and identify the differences that need to be addressed. If you have a lot of bills each month you should be doing this exercise weekly / monthly either on your own or by your bookkeeper to stay on top of what you owe. If you have any errors on your Accounts Payable reports and Expense by Vendor summary reports (open amounts or negative amounts you don't recognize) then this could majorly affect the 1099's you send out to vendors. So getting your open bills right and up to date is extremely important at year-end. It also is the best way to track at any time, what you owe to others.

Gather All W9 forms for 1099 Reporting Deadline on January 31st There are a number of things that can go wrong in reporting 1099 forms, so be as accurate as possible when reviewing your vendor’s paperwork (W9's that you request from them). Not to mention the costly fines you’ll have to pay if you miss sending out one of these 1099- MISC or 1099-NEC forms. At least one month before doing your year-end close in QuickBooks we recommend reviewing all your vendors and making sure their records are up to date. Fortunately, QuickBooks Online has a very easy way to prepare and send 1099’s directly to all your customers, vendors and employees that need one. However, identifying exactly WHO to 1099, how MUCH to 1099, and which 1099 FORM to send can be a much trickier process and take quite a bit of q&a with your bookkeeper along with clean records. You have to make sure the information you put in is the system is valid and up to date. This can be easier said than done so get with your bookkeeper early on to collect W9's from your vendors and identify how much they have been paid the last year and HOW they were paid (if paid via a merchant processor like PayPal then those companies bear the burden of sending the 1099-K form instead. Your bookkeeper can help you make these determinations while you focus on doing your business). There are many things to consider before you can determine if someone should or should not receive the 1099 so getting W9's from all vendors is usually the best first step at year-end. Then hand it all over to you bookkeeper and review the vendors and amount they think you should 1099 before the deadline at the end of January.

Close Your Year Although QuickBooks doesn’t require a close process at the end of a fiscal year, it does allow you to set a closing date for all your transactions. Before getting started, you’ll need to make sure all books have been reviewed and all reports are completed. By entering a closing date for your books, you can no longer modify transactions from the previous year unless you enter the closing date password. If you have a bookkeeper or CPA they will likely do this for you on your behalf. This is done to protect your prior period books and records, so they cannot be edited or deleted without your permission. The feature can be updated according to your business needs as the software keeps the last closing date on track. Remember: you’ll need to use the password each time you save any changes that affect the balance of the closed accounting period. If your CPA or previous b