As a small business owner, the end of the year brings a mix of excitement for what’s ahead and pressure to tie up loose ends. In accounting, “year-end” planning does not just happen in December; it kicks off in October. Starting early ensures a smoother year-end closing process, leaving November and December for executing transactions while giving you the flexibility to make last-minute adjustments if needed. Use this checklist to get ahead of the curve and prepare for a successful 2025.
Why Year-End Planning Starts in October
October marks the beginning of year-end planning, allowing businesses to review financials, make strategic decisions, and prepare for tax filings. Accountants can record transactions correctly, ensuring they align with your overall financial strategy. This proactive approach allows controllers and CFOs to monitor your Q4 performance and adjust for opportunities, such as capital purchases, bonuses, or retirement contributions, while the tax year is still open.
Year-End Checklist for Small Businesses
1. Gather Key Information for Your Tax CPA
Collect and properly record essential financial details that are often overlooked:
- Health and Insurance Payments: Ensure health insurance, HSA, and long-term care amounts paid by shareholders and partners are accurately recorded and reconciled with W-2s.
- Rental Payments: Confirm self-rental amounts are recorded correctly and reconciled with 1099s.
- Expense Records: Separate meals and other reimbursed expenses by those deducted at 50% versus 100%.
- Shareholder Expenses: Record any mileage or expenses paid directly by shareholders.
- Investment Accounts: Detail interest income and investment account changes.
- Business Operations Changes: Record transactions related to office moves, new owners, or significant operational changes.
Ensuring these details are in order means fewer headaches come tax time and better preparation for your CPA.
2. Reconcile Accounts Receivable
Now is the time to collect outstanding invoices and boost your cash flow for 2025. Run through your accounts receivable:
- Collect unpaid invoices to increase liquidity before year-end.
- Measure AR Turnover Ratio to see how efficiently customers pay you. A higher ratio is better, signaling timely payments.
- Plan for 2025: Determine ways to improve AR turnover and implement better payment collection methods.
Related: Cash Flow Is More Important Than Net Income or Profit
3. Review Fixed Assets
Take stock of your fixed assets:
- Update asset records and remove assets that are no longer in use.
- Plan for 2025: Assess if new investments or retirements are needed to maintain operational efficiency.
4. Prepare to Issue 1099s and W2s
Preparing 1099s and W2s early reduces the risk of errors:
- Collect W9s and email addresses from any vendors paid over $600 in 2024.
- Prepare for January 2025: Organize all necessary paperwork to issue forms on time.
5. Perform an End-of-Year Benefits Review
Employee benefits are a significant part of your business strategy:
- Review pension, health insurance, and PTO policies to ensure they’re up to date and competitive.
- Evaluate compensation packages to determine if they reflect the current market.
- Prepare for 2025: Send updated benefits withholding information to your payroll provider.
6. Evaluate Your Staffing Needs
As you close out the year, take stock of your team:
- Assess workloads and determine if hiring additional employees is necessary for 2025.
- Plan for growth: Work these personnel changes into your 2025 budget and forecast.
Related: Do You Need a Crystal Ball to Create a Forecasting Model?
7. Meet With Your Advisors
A strong advisory team helps you avoid costly mistakes:
- Accountant: Schedule a year-end review with your accountant to discuss your financial results.
- Financial Advisor: Check if there are last-minute financial moves that could benefit your tax strategy.
- Insurance Providers: Ensure your business policies are up to date and competitive.
8. Make Year-End Projections
Set your business up for success by projecting year-end results and planning for 2025:
- Share year-end projections with your CPA to finalize your tax strategy.
- Forecast for 2025: Evaluate if 2024 is a baseline year for next year, and adjust projections to account for market shifts, cost efficiencies, and revenue opportunities.
Benefits of Proactive Year-End Planning
Starting your year-end accounting early offers several advantages:
- Strategic Growth: With accurate financials, you can focus on growing your business in 2025 instead of being bogged down by last year’s unfinished tasks.
- Compliance: By staying ahead of regulations and tax requirements, you avoid penalties and fines.
- Maximizing Profitability: Identify cost savings and new revenue opportunities with strategic financial analysis.
Let AIOA Help You Wrap Up 2024
At All In One Accounting, we’re more than just bookkeepers. We’re a team of proactive accountants who anticipate your needs and help you plan. If you need guidance wrapping up 2024 and preparing for 2025, reach out to us today and see how we can help you take control of your financial future.
Ready to move forward? Book a meeting with our experts today to get started with All In One Accounting.
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