If January finds you facing a list of to-dos that you were not able to complete before the ball dropped on New Year’s Eve, you are not alone. The good news is it’s not too late to wrap up those essential year-end tasks – and set your business up for success in 2024.
At Main Accounting, we understand that closing out the year can be a daunting task. This checklist will help you focus on completing the most critical action items – and ensure you are well-positioned to continue growing your business in the coming year.
Prepare Your Budget for 2024
The end of the year is the ideal time to finalize your goals and come up with specific strategies and a budget to achieve those goals.
- Take a close look at your budget for the previous year and compare it to actual figures. Tracking your actual versus budgeted income and expenses will help you stay on track to meet key objectives.
- Updating your budget to a monthly forecast will also help you see where your final numbers for the year will be at any given point within the year. This can be a tremendous help with cash flow forecasting, allowing you to determine if and when you are likely to experience a cash crunch in the months ahead.
- Consider updating your pricing. Are your team costs higher as a result of merit or inflation increases? Have your providers raised prices for software and supplies? You may need to update your revenue numbers to compensate for increased labor and supply costs.
Finalize Your Payroll
Address and correct any payroll issues and make sure you stay in compliance with IRS requirements and deadlines to avoid penalties.
- Have you paid any employees outside of payroll? All compensation including bonuses needs to be added to employee W2s for tax purposes.
- Do you own an S corp? Make sure you have paid yourself through payroll and added any health insurance premiums to your own W2.
- Distribute employee W2s by the IRS deadline.
- Max out retirement contributions and ensure you have funded all employee and employer contributions to your retirement accounts.
- Ensure your payroll reports tie out to your company financials and break out any owner compensation for your tax preparer.
- Be sure to collect W9s for all vendors who will need to be issued a 1099. Non-compliance can be costly – here is a link to the IRS penalties for not filing information returns: https://www.irs.gov/payments/information-return-penalties.
Review and Reconcile Your Financials
Reviewing your financial reports at the end of the year empowers you to make data-driven decisions in the new year. Having accurate financial records will also simplify your tax preparation process and help ensure that you are capturing all possible deductions.
- Add any business expenses paid with personal funds to your company financials.
- Compile a list of all estimated tax payments (federal and state) to be forwarded to your tax preparer.
- Ensure your company financials have been reconciled to the prior year’s tax return.
- Reconcile all bank and balance sheet accounts to ensure all expenses are accounted for properly. For example, if you have been recording payments against a loan (liability on your balance sheet), you may be losing valuable tax savings by not breaking out the interest payments. Without reconciling the accounts to the statements, your profit and loss report may not be accurate.
- Review all draw/distribution accounts to ensure there are no business expenses miscategorized in this account.
- Review all bank reconciliations for any uncleared checks or deposits. We often see large lists of uncleared checks which may need to get voided, or uncleared deposits that should be reviewed and verified. Also, make sure that all bank reconciliation balances tie out to the balance sheet balances.
- After taxes have been filed, record any adjusting entries in your financial records to ensure your books tie out to the tax return, and close out equity accounts to retained earnings.
Looking for professional partners to help you understand your firm’s finances and assist with accounting functions? Main Accounting Services specializes in increasing the success and profitability of growing law firms. Click here to schedule a consultation.