A Step-By-Step Approach to Closing Out Your Financial Books for Year-End

2024 Year-End Financial Closing Guide: 10 Essential Steps for Business Owners

The end of a calendar year is always jam-packed for business owners. Not only are you doing your best to get a little bit of rest in during the holidays as well as making sure you’re well-situated in terms of business and revenue for the first quarter of the next year, you’re also trying to wrap up the year behind you to make tax time as easy as possible.

Here’s where we tell you that with the help of a system or process, closing out your 2024 books doesn’t have to be daunting. We’ve compiled the ten most important steps to closing out your books effectively below:

Start with the Fundamentals: Financial Statement Review

Before diving into specific tasks, thoroughly examine your financial statements. This means ensuring all income and expenses are properly recorded, your balance sheet reflects current reality, and your profit and loss statement aligns with your projections. Any variances should be identified and explained now, not when you’re facing questions during tax season.

Account Reconciliation: The Foundation of Accuracy

Think of reconciliation as your financial “reality check.” Every bank and credit card account should match your records perfectly. Don’t forget to address those hanging threads, such as outstanding checks or deposits in transit. Pay special attention to often-overlooked areas like petty cash and ensure your accounts receivable and payable balances tell the true story of your business’s financial position.

Fixed Assets and Depreciation: The Details Matter

Has your business acquired new assets this year? Disposed of old ones? Your fixed asset register needs to reflect these changes. Proper depreciation entries aren’t just about accounting accuracy; they can significantly impact your tax position. Take time to review each asset for potential impairment or necessary write-offs.

Inventory Matters (If Applicable)

If your business maintains inventory, now’s the time for that physical count. We know, we know: It’s tedious, but it’s essential for identifying discrepancies from shrinkage or damage. Ensure your valuation methods remain consistent with previous periods to maintain accurate financial reporting.

Payroll: Getting it Right for Your Team

Your employees depend on accurate payroll records. Review all wage, benefit, and tax records meticulously. If you haven’t sent out your W-2’s or 1099s yet, you’ll find that accuracy now prevents a lot of headaches later. And, don’t forget to address any outstanding payroll liabilities.They’ll follow you well into this year if you leave them unresolved.

Tax Planning: Looking Ahead While Looking Back

Gather those receipts and organize documentation for deductions and credits. Review your estimated tax payments and prepare for any remaining obligations. This is also the perfect time to connect with your tax advisor to plan for upcoming filings and anticipate any refunds or payments.

Clean Up Your AR and AP

Those outstanding receivables won’t collect themselves! Use this time to follow up on unpaid invoices and improve your cash flow position. Clear old vendor invoices and resolve any discrepancies. If you have uncollectible accounts, consider writing them off before year-end.

Budget Review: Learning from the Past

You create an annual budget for a reason, and this is the time to use it. How did your actual performance compare to your budget? Understanding where you over or underspent provides valuable insights for how your upcoming year might go, or how you want it to go. Use this information to set realistic targets for the coming year.

Documentation and Backup: Protecting Your Data

Finally, ensure all your financial records, reports, and statements are properly backed up. Utilize both digital and physical storage methods for added security, and test your backups to confirm they’re accessible when needed.

And, One More: Determine If Your Financial Assistance Needs Are Changing

The year-end closing process often reveals where your business’s financial management could use additional support. Maybe you’ve outgrown your current bookkeeping system, or perhaps you’re seeing opportunities for more sophisticated financial strategy. This is the perfect time to evaluate whether your business could benefit from professional financial guidance.

We’ll toot our own horn here: Nexagy’s fractional CFO and controller services offer scalable solutions that grow with your business—whether you need help with basic financial organization, strategic planning, or complex financial modeling. Our team can step in at any stage of your financial journey, providing exactly the level of support you need without the overhead of full-time financial executives. Visit www.nexagy.com to learn more about how we can help!

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