With 2020 quickly drawing to a close, many members of our Business Services & Solutions Team are assisting valued clients with the year-end clean-up process. What is this process exactly and why is it so vital as we move towards starting a new year? Here is the prompt some of our team members weighed in on:

Explain what you are doing for a client when you execute their year-end clean-up. Why is this exercise so important?

Enjoy the responses below and take notes. Be sure your accountant is taking care of these matters for your business:

The year-end clean-up process provides several benefits to our clients.  A large part of this process is addressing the balance sheet accounts – e.g. cash, fixed assets, loans, payables, other liabilities.  We want to help the client be sure the balance sheet properly reflects the status of the business at the close of their fiscal year.  This provides the client with a clear picture of their assets and liabilities so they can plan for their obligations going forward.  Additionally we review the profit & loss for reasonableness compared to prior years and address any variances with the client.  This also provides the client with the ability to project their profit/(loss) for the coming year. 

Once their financial statements are in good shape, this helps the tax team to more efficiently prepare the tax return.  It also more accurately captures the proper tax deductions to minimize the tax liability for the business owner(s).  – Linda Lehman

Reviewing a client file at year end or ideally before year end, allows us to help them with their tax planning and budgeting.  Our clean up often identifies transactions that are missing or coded to an incorrect account.  These corrections could change their income for tax planning or change some of the metrics they use for budgeting and business decisions. – Carmen George

Now that we are into the month of December, we are all on the home stretch to finish off this unique 2020 year strong.  Routine housekeeping items are always important;  however, these activities are essential as we get close out this important time of the year.  Please see a good year end “top 10” list, as follows:  1)  review and thoroughly understand the results of your financial statements;  2)  review and understand your cash flow uses during this past year as well as understand your cash flow needs moving forward;  3) update your vendors’ information;  4) take a physical count and understand your inventory levels as well as inventory turns for the past year; 5) make sure you review your accounts receivable and understand when you will get paid for any outstanding invoices;  6) check in to make sure your Team’s payroll information is in good order as issuing year end W2’s is just around the corner;  7) determine how and where you are going to grow your business to make it better during the next year;  8)  update and document your goals for the next year as well as update your written business plan;  9) review your Team to determine where you may need to hire or reduce hours / trim people that you don’t absolutely need;  10) you have survived this crazy year 2020 – so make sure to celebrate with your Team all (even the real small ones) of the successes and accomplishments from this past year.- Stephen Smith

When doing a year end clean up for a client, we are reviewing the accuracy and completeness of the books.    Through this process, we review accounts to make sure their balances are correct, and confirm all activity is captured.  We also review the coding to make sure all transactions are coded to the correct Balance Sheet or Income Statement account.  This process is very important in creating accurate financials that show the true position of the company at year-end.  These financials then flow through to the tax return, and are essential in an accurate and timely tax return.- Natalie Bruns

Year-end clean up is important for several different factors.  Reviewing the general ledger helps to identify any miscoding or maybe even missed transactions altogether.  Since we are so close to the end of the year, it is easier to see services that were profitable.  You can accurately review expenses as well to understand where money was spent within the company.  Reviewing income and expenses can help with planning for next year.   – Julie Roe

When we perform year-end clean up services for clients, we are helping to close out the books for both financial and tax purposes. We use a checklist to verify that tasks such as bank and credit card reconciliations have been prepared which ensures completeness of the accounting transactions for the year. We also tie out account balances for fixed assets, loans, etc and prepare journal entries as needed to record depreciation expense and/or reclass miscoded transactions. This exercise is important to make sure transactions are recorded properly for reporting purposes as well as for tax planning and preparation .- Danielle Cottle

The year-end clean-up is an efficient and effective exercise to ensure every financial transaction has been accurately recorded. Some common steps in the clean-up process include accountant reconciliations, checking for abnormal account balances and posting errors, tidying accounts payable and accounts receivable, and reviewing P&L or balance sheet to look for any errors. Completion of the year-end clean-up gives a more accurate portrayal of the company’s financial standings at the end of the fiscal year, prepares for the annual tax return, and start tax planning for the next fiscal year.- Shirley Boatright

The following exercises are important parts of the year-end clean-up process to ensure accurate information and to maximize as many expenses as possible:

Make sure that prior year’s balances tie to the prior year tax return

Confirm that all bank accounts are reconciled

Make sure all loan statements tie to balance sheet accounts

Make sure there are no uncategorized expenses on the P&L

Make sure the miscellaneous account isn’t too large

Gather information to include on fixed asset schedule

Record current year depreciation

All of this is important to ensure accurate information and to maximize as many expenses as possible.

  • Joee Branfass