Year end planning
As we approach year end, we are consistently asked what items prudent small business owners should look at. Below is a summary of planning to look at to close out the year.
Things to do before December 31
- Look at your Profit & Loss report. Where do you stand? If you have a larger than expected profit, are there any major purchases you should make now that can be depreciated? The increased Section 179 limit as well as the 50% Bonus depreciation exceptions that we have had in prior years has not been extended to date, but there still some advantages to accelerate purchases.
- Verify loan accounts, adjust as necessary to match the year end statements.
- Reconcile AR and AP accounts. Don’t push items that aren’t going to be collected in the new year.
- Verify your 1099 information is setup properly in your accounting system. If you don’t have proper information from each vendor, ask for it now, then create a form to use every year. If you need help setting this up in your accounting system as us.
- Look for fringe benefits you should report on W-2’s. Some of these could include health & life insurance, transportation subsidies, moving expense reimbursements, educational reimbursement programs, and employee loans you’ve forgiven.
- Take a physical count of your inventory at year end. If this is a significant line item for your organization, we recommend doing it more frequently, but at the very least do it at year end.
- Make sure items that should be capitalized are. Review your repair and maintenance expense accounts and make sure there that large purchases that should be capitalized aren’t in these accounts.
- If your company offers stock options or a Stock Appreciation Rights (SARS) agreement that falls under section 409A you are required to have a valuation done annually.
- Create budgets for the next year if you work on a calendar year fiscal basis.
After January 1st
- Reconcile all accounts – bank and credit cards – in your accounting system.
- Verify you’ve made all entries in Petty Cash. Make sure purchases are recorded in correct period, current year vs. new year.
- Verify you’ve made all entries for items you’ve paid for with personal funds. As well as are all personal items paid for with company funds properly reflected.
- Print year end reports. At a minimum you should have a Profit & Loss Statement and a Balance Sheet. Make depreciation entries. You should have the following information on each item: date of purchase, purchase price, make, model, serial number, year, and whether it is new or used.
- Make any adjusting entries for accruals of payroll tax liabilities or pre-paid expenses (get help from your accountant).
- Print and mail payroll forms if you do it yourself (W-2, W-3, 940, 941).
- Print and mail 1099’s to independent contractors (by 1/31). Don’t wait in case there is an error.
- Print and mail 1096 to IRS (by 2/28).