Year End Accounting Closing Procedures for Small Businesses
Before the holiday celebrations kick off, it is wise to plan and be proactive taking steps to close your financial fiscal year before the holiday hang-over. Below is a checklist of the key tasks to help you get started.
Always get a receipt. The CRA typically does not consider credit card statements or cancelled cheques sufficient documentation.
Pro Tip: Stay organized throughout the year. Managing receipts by transitioning to a paperless office is easy with cloud technology, and helps streamline your back office while automating accounting processes.
Invoice your customers for all services performed or goods sold during the year for which invoices have not been issued.
Pro Tip: Push to collect your outstanding invoices before year-end. Send past due statements and follow up with phone calls. Accelerating collections is key to improving your cash flow.
Verify all of your accounts payable have been recorded. Review your business operations to determine necessary accruals.
Bank reconciliations verify all transactions have been posted into your accounting software.
Pro Tip: Automatic bank feeds can help save time and money.
Record final payroll, calculate bonuses and verify payroll taxes. Check that actual payroll tax liabilities and remittances match your T4 summary.
Perform inventory counts as of December 31, or the last day of your fiscal year-end. Verify your inventory valuations and determine if any write-downs are required.
Verify your mileage log of business travel is complete.
Ensure GST has been accounted for on domestic transactions.
Pro Tip: Verify invoices include vendor GST numbers.
Review your Balance Sheet to understand your business health.
Analyze your Income Statement for profitability, and compare to the budget and prior year. Investigate variances.
Pro Tip: Review revenue recognition polices and check if any can be deferred as a tax minimization strategy.
The Cash Flow Statement will show changes in your business' cash flow and categorize investing, financing, or operating activities.
It is worthwhile to do a business health check by reviewing current ratio, total debt ratio and profit margin over time.
Pro Tip: Establish financial and non-financial KPIs and monitor regularly to help your business grow.
Utilize trends from the current year and assumptions for next year to prepare an annual budget. Consider budgeting for capital expenditures, headcount growth, and salary increases, if any.
Rolling forecasts should be prepared as extensions of the budget and revised periodically to consider changes in assumptions.
Review insurance coverage.
Confirm tax deadlines.
Schedule a meeting with your CPA.