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Year-End Checklist For Small Businesses


The end of the year is a busy time for many reasons. Prepping for the holidays, making time for family, and planning for the new year keeps most of us busy through January 1 and beyond. As a small business owner, you have an even longer list of things to think about at the end of the year. This list includes things like financial statements, taxes, and employee incentives.


It can be tricky to balance work and life toward the end of the year. But devoting some attention to your business not only helps you end the current year on a high note, but also sets you up for success in the new year.


Use the following checklist to ensure you take care of business tasks before year-end. With these tasks off your plate, you can turn your attention to the things that matter most.


Accounting

Managing your financial records is critical throughout the entire year, but even more so in December. By maintaining accurate, clean records, you can more accurately predict what the new year has in store for your business. And you’ll be better prepared when tax time rolls around. Here are a few accounting tasks you should take care of before December 31.


1. Run a few standard financial reports

The end of the year is a great time to assess where you stand financially and how your current financial situation compares to previous years. Use your preferred accounting software or system to generate a financial report. This report typically includes an income statement, a balance sheet, and a cash flow statement.

Your income statement, also known as a profit and loss statement, is key when it comes to understanding your profits. This financial report is the best way to see, at a glance, where your business stands financially and what your outlook is like for the new year. If your profits are lower than expected, you may want to make some changes as you head into the new year. If your profits are higher than expected, it might be a good time to make some larger purchases for which you can record future depreciation.


It’s always a good idea to speak with your CPA before making big purchases. An accountant will make sure you have the cash on hand to make the purchase and help you understand depreciation rules.


2. Analyze cash flow statements

A cash flow statement records how your money was spent throughout the year. Cash inflows equate to income. Cash outflows are business expenses. Your goal is to generate more money than you’re spending. Toward the end of the year, it’s a good idea to analyze your cash flow statement to identify cash flow trends throughout the year.

Cash flow problems happen for a variety of reasons. The faster you can identify the problem, the faster you can rectify it. It’s important to note that net cash outflows don’t necessarily indicate that a business has a cash flow problem. Cash flow becomes a problem when outflows exceed inflows. To calculate cash flow, separate cash flows into three specific activities:

  • Cash flow from operating activities (revenue and expenses)

  • Cash flow from investing activities (assets purchased and assets sold)

  • Cash flow from financial activities (loans and repayments)

The cash flow formula adds a beginning cash balance with net changes in each activity to determine the ending cash balance.


3. Verify vendor information

A lot has changed in your business this year, and the same goes for your vendors. At the end of the year, verify that the contact information, including phone number, email address, and contact name, are still correct for each of your vendors. Purge the system of any inactive vendors or inaccurate information. If time permits, evaluate your vendor relationships and look for opportunities to negotiate better deals in the new year.


4. Reconcile accounts receivable

Accounts receivable is the amount that your customers owe you after purchasing your goods or services on credit. It’s a running list of invoices still unpaid and clients that still owe money for work already completed.


Calculating your accounts receivable turnover ratio can tell you how efficiently your business collects revenue. A higher ratio indicates that your customers pay their debts quickly. A lower ratio indicates that your collections procedures could use some work.


No matter what your ratio, if you have outstanding receivables, it’s a good idea to collect past due payments before the end of the year. Reconciling accounts receivable boosts your cash flow and allows you to start the new year without outstanding invoices.


5. Double-check payroll and benefits

It’s better to stay on top of any issues or corrections that need to be made to your payroll before year’s end. Ensure that taxable fringe benefits, such as third-party sick pay or a company car, are accounted for. Other benefits that are easy to forget include educational reimbursement, health and life insurance, and transportation subsidies.


Information Technology (IT)

No matter how much or how little you work with technology, it’s still a good idea to make sure your IT ducks are in a row by the end of the year. This means backing up your data, organizing your paperwork, and making sure your systems are up to scratch. Here are a few IT-related tasks to think about as December 31 draws near.


1. Backup your computer

It’s best practice to keep backups of important data. Make sure that your important files, including accounting documents, client information, creative briefs, and valuable emails are backed up and secure. If your employees deal with important documents, be sure to provide them with external hard drives or access to a cloud-based storage system to ensure all data is stored safely and securely as you enter the new year.


2. Backup your contacts

Whether you do most of your business over the phone or via email, make sure to back up all of your contacts, even if that means writing them down in an old-fashioned Rolodex. In the same way that you updated your vendor information, make sure you have the most up-to-date information for your most important business contacts.


3. Download important files or reports

It might seem counterintuitive, but if you keep important documents or reports on a cloud-based storage system like Dropbox or Box, it’s a good idea to download “hard” copies and back them up to an external hard drive. The golden rule for data backup is 2:1. That is, create two separate digital copies, stored in two separate locations, plus one offline copy (preferably stored somewhere else).


4. Evaluate your file-naming conventions

If you don’t already have a company-wide file-naming system, consider implementing one. For example, if you manually save receipts as Word documents, you might adopt a convention like “LastName-Date-InvoiceNumber.”


Adopting file-naming conventions across the company is especially important for businesses that share servers that can be accessed by multiple employees. When everyone follows the same naming conventions, your files stay organized and easily accessible. Even if you don’t share servers, it’s still a good idea to implement some naming conventions to keep your files organized as your business grows.


As you work to back up your documents and data, make sure you’ve named and organized your files appropriately. Change file names now so you’re not stuck searching for something come June.


Human Resources (HR)

Once the technical and financial tasks are out of the way, take a good, hard look at your team. After all, they’re the lifeblood of your business. Whether you work with a large team or you’re just getting started, there are a few “people” tasks you should take care of before the end of the year.