Small Business Accounting: Closing of Books at the End of the Year?

  • July 30, 2021
  • admin

Closing of books at the conclusion of each year is a traditional task, and an effective bookkeeping procedure simplifies the entire process. The closing process encompasses the year’s transactions and ensures an appropriate categorization. 

Newly established businesses often encounter considerable challenges while closing their books due to the lack of experience. Therefore, it is advisable to be wary of the basics of Small Business Accounting to avoid hassle and misplacement of information.

Tips to Ensure a Streamlined Closing of Books at Each Year’s End

Closing of books lets you account for your company’s yearly financial transactions with precision, highlight rollover balances, and prepare a structure for the upcoming year’s financial reports. Follow these basics to ensure a streamlined closing at the year’s end –

Cross Verify Balance and Year-End Statements

The balance stated on all of your books must perfectly match with your year-end statements. If your company has been handling the numbers manually, then all bank statements, money accounts, and credit cards must get reconciled thoroughly.

Using bookkeeping software is substantially more efficient in accuracy and time consumption; however, you must still double-check all the numbers. You can also hire a team of professionals to reduce time consumption and alleviate the burden on your employees.

Analyse Invoices as well as Accounts Receivable 

Ensure that your team has cleared all year-end invoices and that all sent invoices have gotten remunerated. Invoices can quickly get buried under several year-end tasks, resulting in an under or overstatement of accounts.

From our experiences, it is imperative that you pay attention to even the most trivial tasks with no scope of error. You must also ensure that all of your company’s revenues get recorded in the prescribed time frame.

Close of Books Each Month

Being a small business owner, your company must devote some time to establish a definite view of your financials at the end of each month. It can facilitate better preparation for the upcoming months in terms of economic progress.

Our company has significantly benefited from monthly closing of books helping us analyze and rectify serious mistakes that might have been problematic in the future. It has also prepared for any potential deterrents that might surface in subsequent months.

Adhere to the Imposed Guidelines

Small Business Accounting is performed by retaining entire records of income and expenses while extracting financial data accurately from various transactions. This acquired information lets business owners monitor their finances robustly.

Each business must adhere to a specific set of guidelines to close the accounts at each year’s end, ranging from posting Journal entries to generating final statements. These guidelines have helped our company glide through the tedious steps effortlessly while ensuring compliance.

Employ an Accounting Software

Accounting software systems have simplified the process of closing out your books at the end of each year. Your only job is to ensure that all transactions that happened throughout the year are well-categorized.

You must also match uncategorized revenue, expenses, and other financial activities in your accounting system to their respective class and leave the rest to the software.

Almost all businesses, including us, have employed accounting software to simplify closing of books at each year’s conclusion. After instructing the machine about where the transaction goes, the software processes other relevant tasks automatically.

Hire a Reliable Accountant

Besides having top-notch accounting software that closes your books efficiently, you should consider hiring an accountant to streamline processes. We typically automate the entire process via accounting software, yet we have also hired a trustworthy accountant. 

All you need to do is update all income and expenditures within the software, generate the relevant reports, and have them delivered to your accountant. These reports could include P&L, Fixed Assets, Payroll, and Depreciation, alongside others necessary to wrap up the process of closing books.

Fixed Assets as well as Depreciation Expenditures

Any extravagant fixed asset purchases in a year must get booked in your balance sheets. Be sure to check your current fixed asset inventory and delve into the intricacies of disposal, sales, or depreciation as fitting.

Depreciation issues when closing of books can get tedious and might require you to hire professional services. You are also required to run a taxable sales report confirming that you have left no taxes unpaid on any sales.

Employ Modern Accounting Systems

Employing modern accounting software enables the real-time sharing of books between the client and the accountant by having them uploaded on cloud technology. The accountant performs the typical end-of-year processing, while the accounting system closes the books automatically.

Our only job while operating the accounting system is to fix a lock date. This gesture ensures that no party accidentally alters things in past periods.

Final Words

Closing accounting books is pivotal as it lets your company acquire and analyse its financial transactions throughout the year. The entire array of data derived from closing the books helps file taxes accurately on time.

If you have recently kick-started your business and are unfamiliar with how to close your books, follow the tips mentioned above. You must stay updated with the latest accounting software besides hiring a reliable accountant.

You can also consider outsourcing the process to reliable accounting specialists like OHI and save on costs while having a team of professionals monitor monthly or yearly transactions to close your books.

About Us

OHI is a specialized finance and accounting outsourcing service provider with over fifteen years of finance and accounting outsourcing experience. We have strong functional outsourcing expertise in end to end accounting processes covering daily accounting activities, reconciliations, month end and year-end account finalization processes, employee reimbursements, payroll processing, management reporting and financial analysis.

OHI serves close to 300+ clients across USA, UK and Canada. We invite you to experience finance and accounting outsourcing through us.

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