The Ultimate Bookkeeping Clean-Up Checklist for Year-End Success
Have you ever wondered why keeping client’s books accurate is an essential task for a bookkeeper? Although it is widely believed that bookkeeping is about tax season alone, it is also about ensuring the financial health of your business for long-term success. It is important to maintain a bookkeeping checklist because it helps one identify discrepancies, spot opportunities for savings, and provide an accurate picture of your financial standing.
This article is your guide to understanding a thorough process of bookkeeping clean-up checklist for a smooth and stress-free year-end.
Reconcile All Bank Accounts
The first step to begin your journey is to reconcile all your bank accounts. You should compare your bank statements to your accounting software; thus, it would ensure all your recorded transactions reconcile with your bank accounts. It includes withdrawals, deposits, and any charges. You should also balance your bank accounts at least once a month to identify any mistakes. The following steps can help you reconcile your bank accounts:
- You should compare your bank statement to your accounting software to confirm that all the transactions are consistent.
- The next step is to look for the differences and fix them if required.
- Then, reconcile pending transactions or any unpaid deposits.
- Lastly, you should make sure that all your banking records align with your bank statement.
- Ensure that your accounting records correspond with your bank statement by making necessary corrections.
Verify All Income and Expenses
The next phase is to reconcile your billings and evaluate whether there are overdue invoices that have been properly noted. Accounts receivable are non-current assets that represent the dollar amounts of a Company’s clients who have credit sales still outstanding.
You should also seek to recover any past-due debts and note them accurately. Moreover, you should remind customers or follow up if they have not paid any amount yet. Lastly, you should always audit your receivables to ensure all your unpaid bills are recorded, and a follow-up of unpaid clients is maintained.
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Update and Review Accounts Receivable and Payable
Accounts payable is the sum of money your company is bound to pay to vendors or suppliers. You can make sure that all the bills have been recorded and maintained accurately by checking your accounts payable. You can follow the below-mentioned steps to check your accounts payable:
- Begin by generating an accounts payable aging report that highlights the record of the amount owed and its duration.
- Next, pay overdue bills and keep them in your record.
- Then, consider negotiating with vendors to minimize the outstanding balances.
- The last thing is to reconcile discrepancies between the statements of vendors and accounting records.
Check Payroll Records and Taxes
Payroll encompasses all the expenses related to your personnel, including salaries, wages, and any deductions you may have. By reviewing your payroll records, it can be confirmed that all payments and deductions have been documented correctly, and such payments fall within the lawful financial limits. Follow the below-mentioned steps to review your payroll records:
- Create a payroll report that contains information on all the payments and deductions.
- Next, record any changes in every employee and his or her job organization, including their addresses and tax forms.
- Then, review all your tax obligations including state payroll taxes and federal; be sure to pay them off on time.
- If there are any differences between your accounting records and the payroll reports, make the necessary adjustments.
Review Fixed Assets and Depreciation
If you sell products, then you have to look at your stock records in order to verify whether all the records of purchases and sales have been made. Upon reviewing your records, you are not stocking unnecessary items, and your prices are reasonable, too. To review your inventory records, you should follow these steps:
- Create an inventory report that gives information on the stocks that are available in your store.
- Next, check the differences between your accounting records and physical inventory counts.
- Determine which products or services have a slow turnover rate and may be sold off to provide cash.
- Check ways of pricing to ensure that your products are fairly priced.
Organize Financial Documents for Tax Preparation
It is the same as reconciling your bank accounts to reconcile your credit card balances. It is critical to confirm that the credit card statement with your accounting software seemingly captures every record of the transaction. To reconcile your credit card accounts, follow these steps:
- Check whether all the transactions recorded on your credit card have been entered properly in your accounting software.
- Then, check for any differences and rectify the same in case of any inconsistencies.
- It also involves clearing all the transactions that have not cleared yet.
- Make edits to your accounting ledgers to align with the credit card statement.
Generate and Review Key Financial Reports
The other way of ensuring that all taxes have been met and all paperwork provided is by reviewing tax returns. It’s wise to always confirm your tax files so that you are not penalized for interest or fined. To review your tax filings, follow these steps:
- Compare current federal as well as state income, sales, and payroll taxes.
- Make it your practice to pay all taxes on time and to complete all necessary forms properly.
- Lastly, make use of any tax implication deductions or credits, if any.
Clean Up the Chart of Accounts
The accounts from which information is derived and entered in your accounting software, including assets, liabilities, revenues and expenses, form the chart of accounts. Cleaning your chart of accounts will help you identify and comprehend data more easily. To clean up your chart of accounts, follow these steps:
- You should review all your accounts to ensure they are relevant to your business.
- Combine redundant or unnecessary URLs and web profiles.
- Accounts should be renamed to more descriptive ones in order to minimize confusion.
- Open new accounts where necessary to enhance the tracking of your business transactions.
The steps mentioned above will surely help you clean up your books, start the new year with organized finances, and set your business up for long-term success.
