Best Practices for Small Business Year-End Accounting
- December 20, 2016
- Sohamy Sandoval
- 361 Views
Below are several best accounting practices that businesses should incorporate into their year-end accounting procedures.
- Reconcile bank accounts: Make sure your cash balances equal your bank’s year-end statement balances. Review stale checks to determine why they have not cleared the bank by contacting the payee and making necessary adjustments.
- Analyze Accounts Receivable and Accounts Payable: Review both accounts for open bills and invoices that may have been paid, but not accounted for correctly to ensure neither has been overstated or understated. Analyze for stale bills that may require a provision for estimated losses.
- Fixed Assets: Confirm that any large purchases made in the current year have been recorded correctly to the balance sheet. Review prior year assets to ensure that these assets are still in service.
- Inventory: If applicable, year-end is an ideal time to review inventory. Performing a physical count will help to ensure your inventory is properly stated on your business balance sheet.
- Note Payables and Line of Credit: Make sure your loan amounts match the year-end statement from your lender. Make necessary adjustments to principal and interest expense.
- Reconcile Payroll to Payroll Reports: Make sure payroll has been entered correctly in your accounting system for the year by comparing against year-end payroll reports. Salary expense and employer tax expense should match totals from Form 940 and Form 941.
- Fringe Benefits: Make sure that applicable fringe benefits have been reported to your payroll company before year-end. Fringe benefits may include items such as educational assistance, moving expense reimbursements, and personal use of company automobile. See IRS Publication 15-B, “Employer’s Tax Guide to Fringe Benefits” for a complete list of fringe benefits.
- Receipts and Documentation: Gather all receipts and documentation necessary to validate and support income tax deductions.
- Form 1099’s: Businesses are required to report payments made to certain vendors for personal services and other types of payments. Form 1099’s are due to the recipient and the Social Security Administration by January 31. For additional information, see previous blog post, “Who Gets a Form 1099 and When are They Due?“
- Tax Return Due Date Changes: The IRS has implemented revised tax return due dates that may impact the timing of your 2016 business financial statements for tax purposes. As a result, financial information from the prior year will need to be submitted by February 15, to complete the tax returns and/or prepare calculations for extension purposes. For further information, see 2016 Due Date Changes.
- Budget: After confirming current year financials are accurate and up-to-date, another good business practice is to prepare a budget for the next calendar year. A budget will help your company stay organized and plan for the upcoming year.
For more information on these topics, please contact Sohamy Sandoval, Sr. Consultant at Aronson LLC 301.231.6200