It’s almost time to ring in the new year but before we pop open the champagne, there’s a lot to do to close out your books for the year. There’s expenses, invoices and bank accounts to reconcile. So hold on to those champagne flutes and party hats. You’ll first need to get yourself organized.
If you start now, you won’t feel rushed or overwhelmed come the ringing in the new year. You’ll even save yourself the headache of scrambling to do the work at tax time.
Remember, tax filings in Canada are due June 15, though you have to pay your dues by April 30th. In the U.S., you’ll need to file by April 15th. And while those filing deadlines may seem like a long ways away, they always come sooner rather than later. I don’t want you to be stressed when they do!
At the end of the fiscal year, you need to close out the business year to get ready for tax time as well as close out your accounts for the year. Most likely your fiscal year for your business follows the calendar year, so it’s best to start now before the year is over. All of your accounts have to be reconciled. You’ll want to know how much money you made and your expenses for the year. This information will all go into your tax returns, as well.
Want the tutorial of how to close your books in one easy-to-use PDF with free spreadsheet templates? Click here to access my Bookkeeping Resources library to get the entire How to Close Your Books series as a PDF.
You’ll also want to reconcile all of your “temporary” accounts (accounts like Sales, Expenses and Draws) so they are set to zero for the new fiscal year. When you close out and reconcile these accounts, it allows you to compare how much you made and spent during the year. This information is very helpful for year-to-year comparisons, too. It will help show you how financially stable your business is, how much you have to invest back into your business, or how much harder you have to work in the new year to grow your business. When you know this information, putting together a plan to get to that six-figure mark (or over it!) becomes a whole lot more tangible.
Over the next couple of weeks, I’ll show you how to close out your accounts for the year and help you get ready for tax time. I’ll discuss the specifics of expenses, invoices, and reconciliation of your accounts.
To get started, you’ll need to start gathering your expenses and invoices over the past year. You’ll also need to look at your business bank accounts including PayPal, Square, or the like. We’ll take it slow and I’ll show you how to go through one month at a time so you won’t be overwhelmed.
Next week we’ll start looking at your expenses. If you haven’t kept up with your bookkeeping throughout the year, or haven’t started, you’ll be just fine. Don’t fret. I’ll show you how you can get your finances in order. So to be prepared, gather your expenses for the first three months of the year. I’ll explain how to deal with them and get you started on the rest of the year’s expenses.