| Why Year-End Bookkeeping Matters
As we wrap up 2024, organizing your financial records isn’t just a task—it’s the foundation for a successful new year. Accurate and timely bookkeeping helps reduce tax-time stress, ensures compliance, and keeps your business running smoothly. To help you achieve a clean slate for 2025, we’ve crafted this comprehensive guide with best practices and actionable tips.
Step 1: Reflect on 2023 and Lock the Books:
Before diving into the current year, finalize and lock 2023. Here’s how:
Post Adjusting Journal Entries
· Take the tax preparation adjusting journal entries we provided and post them dated 12/31/2023.
· Generate a 2023 Balance Sheet and compare it to the trial balance we provided. If discrepancies arise, contact us for assistance.
Lock the File
· Secure the file to prevent accidental changes. A locked 2023 ensures you’re building 2024 on solid ground.
Step 2: Nail Down 2024 Monthly Reconciliations:
Reconciliation is your most powerful tool for keeping records accurate:
· Cash and Credit Card Accounts: Reconcile monthly, with special attention to December.
· Stale Transactions: Identify uncleared entries older than a year. These can signal issues like uncashed checks or forgotten credits. Flag them and reach out if guidance is needed.
Step 3: Eliminate Suspense Accounts:
Suspense accounts, such as “Ask My Accountant” or “Uncategorized,” are temporary holding zones. By year-end:
· Reclassify transactions to their proper accounts; please reach out to us with questions, if needed.
· Ensure all suspense accounts show a $0 balance.
· If an item can’t be resolved, please leave a memo describing the details for our review.
This step keeps your financial statements accurate and precise.
Step 4: Master Payroll Reconciliation:
Ensure payroll expenses are accurate. Here are some ways to ensure accuracy:
· Match payroll expenses in your books with the year-end report from your payroll provider.
· Check that your payroll-related accounts (salaries, wages, and taxes) align with the final payroll summaries.
Step 5: Capitalize on Asset Purchases:
Large purchases such as equipment or vehicles require special treatment:
· Threshold: If an item costs over $2,500, it likely needs to be capitalized and depreciated over time.
· Documentation: Provide purchase details and invoices for such items. Examples include machinery, office furniture, building improvements, leasehold improvements, intangible assets (e.g., patents, copyrights), landscaping and outdoor structures, construction projects and even software. Proper classification ensures tax savings and compliance.
Step 6: Out-of-Pocket Expenses – Don’t Miss Deductions:
If you’ve paid for business expenses personally, don’t miss out on those deductions:
· Summarize these expenses, including receipts and descriptions.
· Provide them to us so we can prepare any necessary adjustments to account for these expenses in your financials and reduce your taxable income.
Step 7: Tidy Up Receivables and Payables:
· Accounts Receivable: Run an aging report to evaluate overdue balances. Consider writing off amounts that are unlikely to be collected.
· Accounts Payable: Review outstanding bills and confirm they reflect accurate balances.
This keeps your cash flow projections reliable and up-to-date and increases the accuracy of your taxable income.
Step 8: Differentiate Your Meal Expenses:
Maintain separate accounts for the following meal expense classifications:
· 50% Deductible Meals: Business-related meals.
· Non-Deductible Entertainment: Social expenses unrelated to business.
Keeping these categories aids us in properly reporting these expenses on your tax return.
Step 9: Review the General Ledger:
Take one final look at your General Ledger for the full 2024 year:
· Scan for unusual or misclassified entries.
· Correct errors and ensure all accounts reconcile with their supporting documentation.
Step 10: Lock 2024 and Prepare for the Future:
Once everything is reconciled and reviewed and you are satisfied your bookkeeping file is finalized:
· Lock your 2024 file to prevent post-closing changes.
· Provide us with a backup copy (if you use QuickBooks Desktop) or notify us that the books are ready (if using QuickBooks Online).
Please do not make any changes to the bookkeeping file after you provide us with the finalized copy – we will assist with any adjustments from there and provide you with any necessary journal entries.
This step signals that your financials are ready for tax filing and reporting |
