Yes, it’s here: the end of the year, and a busy time for you as a solo practitioner or small business owner! As the new tax-filing season looms in the first quarter of the new year, it is also the time for you to review your business finances.
If you have been faithfully utilizing your small business accounting software, it should be very easy for you and your accountant to generate the reports and financial statements necessary for your end-of-the-year review session. Year-end financial statements are used to prepare taxes, are used as the foundation for all other reports in the future, and are used to assist with the important future business decisions you will be making.
In the U.S., many of the tax credits for charitable contributions may be ending, so this is also a good time to review and re-evaluate your year-end donation strategy to ensure that your funds reach your charities in time.
The year-end financial statement that you and your accountant generate should include:
- A review of the balances of each account, including any subsidiary balances. Are these balances what you expected? If not, what should be included or revised?
- Ensure that all assets and liabilities are accounted for; sometimes you might “remember” an event or issue that fell through the cracks.
- Thoroughly review the sales, cost, and expense accounts: when compared to prior years, are any increases or decreases in these accounts reasonable and within expectations?
- Reconcile all of the accounts with the general ledger to ensure all entries are legitimate and accurate.
- Look for any trends and business practices in this year that will help you to run his/her business more effectively and efficiently next year.
Next up: The Ten Questions You Should Ask Yourself About Your Business. Stay tuned!