Streamline Your Business’s Year-End
The Entrepreneurial Accounting Solutions (EAS) team is taking a page out of the Audit team’s playbook; their recent article, “How Manufacturers Can Streamline Their Year-End Audit for Maximum Efficiency,” breaks down various steps on how manufacturing companies can improve efficiency and be prepared for their upcoming audit. In this article, a look at how a business can streamline their year-end for tax preparedness and efficiency will be provided.
Year End Close Basics
Let’s review the basics of year-end close, including the gathering of tax documents and posting of year-end adjustments. It is a best practice to print comparative financial statements, including one’s Balance Sheet and Income Statement (Profit & Loss), and work through each account to tick and tie their balances.
Starting with the balance sheet, it’s important to walk through each asset and liability account, ensuring they are reconciled through year-end. This includes resolving old items and ensuring balances are inclusive of current open transactions. This may involve gathering several year-end documents such as:
- Bank Statements
- Credit Card Statements
- Loan Statements – Ensure that all loan balances and payments have been completed with the interest separated out on the P&L.
- Investment Statements – Year-end 1099 consolidated reports (normally received in February) and December 31st statements
- Depreciation and Amortization Schedules – Make sure to review for any items no longer in service that need to be disposed of.
Income Statement Review
Additionally, it is important to review one’s Income Statement (Profit & Loss) in connection with one’s year-end close process and tax forms received. If class reporting is used, make sure to review a YTD class report to ensure all transactions are associated with a class. Additional documents may need gathered for this review, including these comment ones:
- 1099 NEC – Payments received for services
- 1099 MISC – Payments received for rent and other items
- 1099 K – Payments received from Third Party Processors (Apple, PayPal, Stripe, Credit Card Processing agents)
- 1099 INT
- 1098 for Mortgage Interest
- Real Estate Taxes
- W2s, W3
- YTD Payroll Summary Reports
- Invoices for large ticket purchases, including equipment, vehicles and other assets over $2,500 that may need capitalized
Make sure to review large changes in accounts to verify that transactions are coded appropriately. The easiest way to do this is to look at the Dollar and Percentage Variances on one’s comparative reports and investigate transaction detail. One should ask, “Are these large changes expected or were they unforeseen items that need noted for an accountant?” If the above items are conducted and shared with one’s accountant, it will make the year-end process efficient and reduce overall questions, resulting in timely return delivery.
For more information on year-end suggestions, please view a previous article by the EAS team, “Year-End Preparations with EAS,” where additional examples and detail on what the EAS team looks for at year-end when closing the books for clients.
With collaboration with our clients, EAS can be successful in providing complete and accurate financial data for year-end and tax return preparation. For more information or to work with the team to ensure your financials are complete, reach out to Alonia Johnston.
About the Author
Alonia joined McKonly & Asbury in 2022 and is currently a Senior Accountant in the firm’s Outsourced Accounting Segment.
