As the year comes to a close, accurate and well-prepared financial records are essential. A clear year-end accounting checklist helps businesses close their books with confidence, supporting effective tax planning, informed decision-making, and a clean start to the new year.
Year-end accounting checklist: key steps to close your books
Reconcile all bank and credit card accounts
Ensure that all bank accounts, credit cards, and loan balances are fully reconciled through year-end. Every transaction should be accounted for, categorized correctly, and matched to supporting documentation.
Unreconciled accounts are one of the most common causes of delays, errors, and unexpected tax issues.
Review and categorize expenses
Confirm that all expenses are properly categorized and coded. Pay particular attention to:
- Owner expenses
- Meals and entertainment
- Travel and vehicle costs
- Home office or mixed-use expenses
Correct categorization ensures accurate financial statements and maximizes allowable deductions.
Verify accounts receivable and accounts payable
Review outstanding invoices and unpaid bills. Write off uncollectible receivables where appropriate and ensure all year-end liabilities are recorded.
Accurate receivables and payables give a true picture of your financial position and prevent income or expense distortions.
Review payroll and contractor payments
Confirm that payroll records are complete and accurate, including bonuses, commissions, and benefits. Verify that independent contractors are correctly classified and that totals align with year-end reporting requirements.
This step is critical for avoiding compliance issues and penalties.
Reconcile loan and credit balances
Confirm loan balances, interest expense, and principal payments against lender statements. Any discrepancies should be resolved before closing the year.
This also helps identify opportunities for refinancing or restructuring in the year ahead.
Check fixed assets and depreciation
Review asset purchases made during the year and confirm they are properly recorded. Ensure depreciation schedules are up to date and aligned with your tax strategy.
This step can have a meaningful impact on both financial reporting and tax outcomes.
Review inventory (if applicable)
For businesses that carry inventory, perform a year-end inventory review. Ensure quantities, valuation methods, and cost of goods sold are accurate and consistent.
Inventory errors can significantly affect profitability and tax reporting.
Prepare for tax planning
Once your books are accurate, review your financial results with an eye toward tax planning. Understanding your income, expenses, and cash position before year-end allows time to take advantage of available strategies rather than reacting after the fact.
Generate final financial statements
Produce final versions of:
- Balance sheets
- Profit and loss statements
- Cash flow statements
These reports should be reviewed for accuracy and consistency before they are used for tax filings, planning, or strategic decisions.
Set the stage for the New Year
Use your year-end review to identify trends, risks, and opportunities. Clean books make it easier to set budgets, forecast cash flow, and make informed decisions in the year ahead.
Close the year with clarity
Closing your books accurately at year-end provides the clarity needed for effective tax planning and informed decisions in the year ahead. Using a structured year-end accounting checklist helps ensure nothing is missed, reduces risk, and creates a reliable foundation for the new year.
Year-end can feel busy and time-sensitive. If you’d like guidance or reassurance as you close your books, we’re happy to help.
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