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Year End Accounting Closing Procedures for Small Businesses

  • CFOlift
  • Dec 23, 2017
  • 2 min read

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.

Receipts

  • 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.

Invoicing

  • 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.

Reconciliations

  • 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.

Financial Statements

  • 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.

Forward looking

  • 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.


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