By the Numbers: End-of-Year Accounting

Not many companies look forward to end-of-the-year accounting. In fact, make that none. It’s a long, laborious process with no room for error. Mistakes can lead to heavy IRS fines and worse. Add this responsibility to the usual chaos that attends the end of the fiscal year at most businesses, and you have the task no one wants but whose outcome affects everyone. Because end-of-year accounting is one of the most vital indicators of your company’s health.

As a business owner, your end-of-the-year accounting should address a long list of questions whose answers taken as whole will give a comprehensive picture of your fiscal stability. This list includes:

• Does my general ledger bank balance reconcile to the bank statement?
• Are there any accounts receivables that are worthless and should be written off?
• Is my balance in Allowance for Bad Debts a reasonable estimate of potential write-offs?
• Is the company’s inventory balance correctly stated?
• Are there inventory items that cost more than their worth and should be written down to their market value?
• Does the company still have all the fixed assets?
• Is my depreciation correctly recorded for those fixed assets still in the company’s possession?
• Did I amortize goodwill and franchise fees?
• Are there any prepaid items that need to be adjusted such as prepaid insurance?
• Have all assets been reviewed for accuracy?
• Have we recorded all of our payables?
• Do the payroll tax liabilities coincide with our quarterly reports?
• Do the balances in the notes payable accounts (loans) agree with what the banks say we owe?
• Are there other debts that have not been included on the books?
• Are there debts on the books that no longer exist because of forgiveness or oversight?

As a business owner myself, I know how daunting this may seem. Look at this list and it is small wonder so many companies, lacking the resources or time, hire outside accountants to do the work. Which might be a smart idea for your business too. Out-sourcing the responsibility ensures tax deadlines are met as well as frees up valuable internal resources for other tasks. By using a firm specializing in accounting, you also narrow the chance for accounting errors. If you don’t out-source already, it might be something to consider in the coming year.