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End of Year Accounting Best Practices
Are Your Books Ready for 2019 Close?
Everyone knows that hindsight is 20/20, but right now we need to be approaching the year (and decade!) 2020 with some serious foresight. Like the academic calendar, or the NFL calendar, the accounting year doesn’t really begin in January and end in December. That’s because of taxes, of course, but that doesn’t mean that the end of the calendar year isn’t a significant marker when it comes to closing the books. Instead of being a point of terminus and reflection, it’s a chance to make sure all your ducks are in a row before 1st quarter begins. With that in mind, here is a great end of year accounting checklist to make sure you enter 2020 full of steam.
The first step to ensuring your end of year accounting is on track is to reconcile your books, including bank statements, credit cards, and any other account related to your business. All of these accounts should match the numbers as they appear in your accounting software. If you’ve been diligently recording information all year, you may find this process easier than those who have to input a lot of data en masse. No matter the case, though, every end-of-year operation begins with having balanced books.
#2: Payroll, accounts receivable, and accounts payable
All of these should be evaluated at year’s end due to the bearing they will have on your tax accounting. Any outstanding invoices should be paid prior to December 31, while all accounts receivable paperwork should at least be verified and confirmed. You can’t force somebody to pay you before the calendar turns, but you should know who owes you. On the payroll side, it’s important to make sure year-end checks and pay periods are closed accurately and in a timely fashion. A payroll mistake is never fun, but one at this time of year can be a tremendous pain.
#3: W-2s and 1099s
Employees need W-2s , and contractors need 1099s. In fact, if you employ full-time team members, you know they will ask about W-2s about as soon as their first 2020 paycheck. While the W-2 process runs like clockwork at most businesses, getting 1099s sent out can be trickier. Any contractor or freelance worker you paid over $600 last year needs a 1099. Taking care of them early can make tax season a lot less hectic.
#4: Inventory check-up
Another great area to assess your end of year accounting is inventory management. Even if your books reconcile, that doesn’t mean you have a thorough understanding of which items have become dead stock, which channels are performing, whether you have drop-ship orders to complete, and so many other factors. The more inventory data you have and the more accurate that data is, the better you can plan for the coming year.
#5: Analyze your data
Once you’ve gone through the trouble of collating and verifying your end of year accounting, it’s easy to consider yourself over and good with. Don’t succumb to this temptation. Generating insightful reports and analyzing information is hugely beneficial. Software is a huge help here, and so too can be a dedicated accountant who provides advisory as well as compliance services. Numbers being right is important, but they should also be able to help your business going forward.
AccountingSuite has all the tools you need to make the end of year accounting process a painless one. Click here to find out how our software can help 2020 be your best year yet.
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