Now that we are firmly in Q4 of 2018, 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. This happens a lot and doing a proper year-end close is the easiest way to avoid this issue.
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. 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 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.
Reconcile Your Balance Sheets
As dull as it may sound, you have to make sure all bank account reconciliations are complete and cleared of any old deposits or debit transactions. Be able to validate any invoice appearing on the accounts receivable and accounts payable detail reports, and ensure that your previous balance sheet and tax return are a match.
Reconcile Your Bank 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. This can be tedious but QuickBooks actually makes it relatively easy. (Watch a tutorial here) 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. SaaS products, rent or utilities on locations that are no longer relevant, trade publications, or membership organizations will usually just be charged directly to your card. If these are no longer important to your business then this is a good time to cancel them and recoup the savings.
Schedule A Physical Inventory
The Advanced Inventory feature in QuickBooks Enterprise makes this very easy because it integrates natively with a barcode scanner. You will want to take stock of everything you have on hand so that you enter the next fiscal year knowing how much money you have tied up in inventory. You can also check for losses, determine upcoming promos based on stock available, and true up your inventory with your books.
Project Income or Losses for Tax Planning
QuickBooks 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. 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.
Make use of QuickBooks’ customized report feature to identify the areas of your business that need adjustments. For example, you can tweak a Profit and Loss report so that it only shows the profits and expenses for each individual product. It’s a great way to stay up to date with your businesses’ financial performance while keeping track of your own evaluations.
Verify Your Customer Accounts
Clear up your books by going through all your vendor and lender files. If you have customers who are late on their payments or vendors with outstanding loans, 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 can also impact your 1099 forms, so make sure you review customer accounts to update your files correctly.
Gather All 1099 Forms
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. Not to mention the costly fines you’ll have to pay if you miss sending out one of them. 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 Enterprise has a very easy way to prepare and send 1099’s directly to all your customers, vendors and employees. All you have to do is make sure the information you put in is valid and up to date.
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.
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.
Print Out Your Accounting Reports
Even though all your files are digital, it’s still recommended that you print out your statements at the end of the year. QuickBooks can easily generate these files for you, by choosing the information that you find most useful. Your profit and loss statements, as well as the balance sheet, are the most important financial reports to print out for your records.
Apart from these, you can also use the AR and AP aging report, stockholder details or all of your quarterly payroll statements. It all depends on the type of business you’re running. In all cases, keep your data entry up to date and work with your accountant to identify which other accounting reports you should save.
This list may sound daunting, but QuickBooks Enterprise makes it very easy. We also have packages available to help with your month-end close and year-end close using QuickBooks.
