Ready or not, December is just around the corner. For many business owners, the next few weeks are a race to complete everything on their to-do lists before ringing in the New Year.
The holidays are hectic enough without the added pressure of thinking you have to wrap up every loose end. Simplifying the process by setting priorities – and committing to completing the most essential tasks – is the key to closing out the year with less stress and more peace of mind.
Main Accounting Services created this Year-End Checklist to help you do just that. We focus on the three most critical action items to complete to give your business a running start in January.
- Prepare a 2025 Budget
The end of the year is the ideal time to finalize your goals and develop strategies and a budget to achieve them.
- Take a close look at your budget for the previous year and compare it to actual figures. Tracking your actual versus budgeted income and expenses will help you stay on track to meet key objectives.
- Updating your budget to a monthly forecast will also help you see where your final numbers for the year will be at any given point within the year. This can be a tremendous help with cash flow forecasting, allowing you to determine if and when you are likely to experience a cash crunch.
- Consider updating your pricing. If your team costs are higher due to merit or inflation increases, or providers have raised prices for software or supplies, you may need to update your revenue numbers to compensate for the increased costs.
- Finalize Payroll
Address and correct any payroll issues and avoid penalties by ensuring you comply with IRS requirements and deadlines.
- If you have paid any employees outside of payroll, all compensation (including bonuses) needs to be added to employee W2s for tax purposes.
- If you own an S Corp, make sure you have paid yourself through payroll and added any health insurance premiums to your own W2.
- Distribute employee W2s by the IRS deadline.
- Max out retirement contributions and ensure you have funded all employee and employer contributions to your retirement accounts.
- Ensure your payroll reports tie out to your company financials and break out any owner compensation for your tax preparer.
- Collect W9s for all vendors who will need to be issued a 1099. Non-compliance can be costly – IRS penalties for not filing information returns can be found here: https://www.irs.gov/payments/information-return-penalties.
- Review and Reconcile Financials
Reviewing your financial reports now will empower you to make data-driven decisions next year. Having accurate financial records will also simplify tax preparation and help ensure that you capture all possible deductions.
- Add any business expenses paid with personal funds to your company financials.
- Compile a list of all estimated tax payments (federal and state) to be forwarded to your tax preparer.
- Ensure your company financials have been reconciled to the prior year’s tax return.
- Reconcile all bank and balance sheet accounts to ensure all expenses are accounted for properly. For example, if you have been recording payments against a loan (liability on your balance sheet), you may be losing valuable tax savings by not breaking out the interest payments. Without reconciling the accounts to the statements, your profit and loss report may not be accurate.
- Review all draw/distribution accounts to ensure there are no business expenses miscategorized in this account.
- Review all bank reconciliations for any uncleared checks or deposits. We often see large lists of uncleared checks which may need to get voided, or uncleared deposits that should be reviewed and verified. Also, make sure that all bank reconciliation balances tie out to the balance sheet balances.
- After taxes have been filed, record any adjusting entries in your financial records to ensure your books tie out to the tax return; close out equity accounts to retained earnings.
At Main Accounting Services, we understand that closing out the year can be a daunting task. If you are looking for professional partners to help you understand your firm’s finances and assist with accounting functions, click here to schedule a consultation. We specialize in increasing the success and profitability of growing law firms – and will help position your firm to thrive in the upcoming year.