The final weeks of the year go through, but before you begin planning for the year ahead, it is important to plan time for bringing the current year to an end.

Since closing your accounts is a vital financial responsibility at the end of the year for any company.

However, it’s not always easy, particularly for entrepreneurs just starting.

To simplify this process and help you take control of your accounting for your business, We have prepared an easy-to-follow guide with 15 essential steps.

Step 1: Get unbilled projects and orders invoiced.

In closing the books, it is easy for an invoice or credit note to be overlooked amid the many tasks that come with year-end.

This could lead to an over or understatement of sales, which can cause tension at the last minute.

Thus, you must be aware of all the details that aren’t important and ensure that all expenditures and income are correctly recorded and up to date.

Also, ensure that you’ve paid off the year-end invoices and that all invoices sent are remunerated in sequence. The majority of invoice production software can do this automatically.

If you have any outstanding invoices that your clients do not pay and you cannot pay them, send reminders of invoices to make sure that they are paid as quickly as possible without disrupting the relationship with your customers.

Step 2: Categorize and record all business expense

These final couple of weeks in the calendar are the perfect time to review last year’s expenses that you’ve neglected to classify or track.

Ensure that your expenses for the past year are correctly entered and categorized in your accounting software.

Making sure you record your expenses correctly throughout the year can allow your accountant to determine the tax-deductible expenses your small business is eligible for.

Step 3: Separate personal and business expenses. personal expenses

In general, small-sized businesses need a separate bank account to cover business expenses.

However, most small-sized businesses don’t take into consideration this. Small business owners often are confused when they make personal payments through a bank account for business and reverse.

If you think this applies to you, then be prepared for a significant chance of being in danger, since If HMRC believes that your modest company expenses are personal expenses, they could perform an audit.

It is important to keep up to date your personal and business expenses.

You may also utilize accounting software, such as QuickBooks Self-Employed, Xero to help you separate your expenses in a snap.

 Step 4. Double-check the expenses you are allowed to incur.

As tax time is coming up, it’s important to make sure that you’re utilizing all allowable expenses to maximize your small-business tax deductions.

Small-scale businesses claim business expenses, such as using a home office and business travel machines and tools.

To ensure that you’re making the most of all available expenses, make sure you double-check the expenses and keep track of all receipts for proof. For instance, you could use HUBDOC, which is OCR invoices and receipts documenting and an organizing tool. It is included in Xero Business plans.

You may also seek advice from your tax professional or accountant to cut tax costs efficiently without sacrificing any deductions.

Step 5: Make sure that you make sure you pay the contractors.

Before closing your accounts, be sure to check if you have to pay your contractors.

If not, you can go on; however, if you realize that you have failed to pay one of your contractors, ensure that you have cleared the entire payment before proceeding to the next step.

In the accrual-based accounting system, each bill is recorded once due, and all invoices are filed when work is completed.

Accrual-based accounting is an alternative to the cash-based accounting system. Cash-based accounting, like the name, implies that transactions are only recorded when cash is received or paid received.

Discuss with your accountant the best method of recording and reporting all business activities.

Step 6: Reconcile bank accounts

After recording all your small business’s expenses and income, make sure you make sure that you reconcile the business’s bank account and account with credit cards.

Check the totals from your bank statements with expenditures and income reported within your software for accounting.

If they aren’t If they don’t, there’s some error or discrepancy which you’ll have to resolve. Bank reconciliation reports using the accounting program you use.

To make this process more efficient, it is suggested to reconcile your account once every month.

Step 7. Make sure that your fixed assets are current

In general terms, the term “fixed asset” refers to an asset that can last longer than the fiscal year.

If, for instance, you bought a brand new printer in your small-scale company, it would be considered to be fixed regardless of whether you paid for the printer as an expenditure, because the life span of a printer is more significant than one year. The same is valid for computers or laptops.

Before you close your books, ensure that all your fixed assets have been updated, or you can check if a new fixed asset might have been misplaced.

The accountant will perform the depreciation report at the close of the calendar year. If you’re using Xero, the software, you can utilize its fixed assets module to keep track of the total assets. It will calculate depreciation for you automatically.

Remember to also take advantage of the annual allocation for investment for primary machines and plants.

step 8: Decide employee bonuses

If you choose to give an employee incentive, you’ll have to put the correct amount of withholding tax aside.

Therefore, before the end of your financial year, you should decide whether your company will offer an employee bonus or not.

Step 9: Check payroll taxes

Before the end of your financial year, ensure that your pay tax liabilities according to the accounting software you use to match with the monthly Real-Time Information (RTI) reports that you have submitted to HMRC.

It’s a good practice to review your liability for payroll through the tax authorities’ PAYE portal. There are a lot of variations due to the cost of interest and penalties due to late payment.

If you discover any contradiction you can determine, it is advisable to consult your accountant before making your final decision about closing the books.

10. Check the information of every employee

Verify the details of all your current and past employees and contractors to ensure that the information you have in your file is accurate.

It’s a good idea to inform your employees by sending out a mailer if any modifications are made.

Step 11: Start counting your company’s inventory.

Perform an inventory count when you close your books at the end of the day. This is typically referred to as the year-end of your financial year. This is the date on which your business’s balance sheet is created.

If, for whatever reason, you can’t complete the transaction on the same thing the next day.

Step 13: Run reports

Before closing your accounts, make the profit and loss and balance sheet and bank reconciliation and VAT reconciliations using your accounting software. You can then analyze these reports to ensure that the data is accurate.

You might also have to conduct your cash flow report and other reports your accountant may require for tax purposes.

Step 14: Create an account for your company

This step is extremely crucial.

After you’ve completed these steps, create a file for your company with the years’ data.

Your accountant may also need the company’s records to file taxes or make any necessary adjustments at the close of the fiscal year.

You can utilize the feature for your company file to save and create the data. However, your application doesn’t include this feature. Then you can export the information into an individual file and save them safely.

Step 15: Close your Books

After completing all steps thoroughly, you can put your books down!

It is possible to make this procedure easier thanks to the aid in the form of Accounting software.

If you decide to date for locking or closing your books, you will not be able to update or add transactions that were completed before the lock date.

Final thought

Be sure not to skip any of these steps to effortlessly finish this challenging task at the end of the year.

A professional onboard can make this process simple and easy for you. Therefore, hire an accountant to simplify the process for you. After you’ve completed your bookkeeping and are ready for tax season, you can begin planning for tax season.