Year end is defined as year’s end, the end of the calendar year. Translated for all of us business owners that means “YEAR END” – the end of the fiscal year – that is if your year runs from January 1st to December 31st. “YEAR END” is not as easy as it may sound!
In the calendar year, year-end means the holiday season, time to spend away from work with our families. A time to reflect on what happened in the past year and to be excited for what the New Year has to offer! It is an amazing time!
But for those of us running our own businesses, year end is not that simple, not by far. Year end has a life of its own within business. There is a whole wealth of things that have to be completed some in a very specific order and some by very specific dates – in order for the government to be happy with you.
Year end means verifying that we are prepared for all that may happen financially within our business for the New Year. Calculating all the factors and costs that are required to maintain and grow to the level of income you would like to see for the New Year.
There are different perspectives to year end within a business. The first perspective is the bookkeepers. The bookkeeper has a very detailed list of items they have to complete. If one item is missed or skipped it can potentially throw off the entire process; a process that flows from the bookkeeper to the owner/general manager to the CPA. Year end is not as simple as month end (not that month end is easy by any means).
The second perspective is from the owner/general manager’s view. It is their responsibility to review specific items on the Balance Sheet to verify proper allocation, such as Fixed Assets and their Depreciation Schedule. Items like this should not be left to the bookkeeper or CPA – the owner/general manager should know what assets they have and what the depreciation schedule is for those items. Giving them the ability to know if they should be looking at purchasing new in the New Year or is everything where they want it. These decisions don’t only affect their budget for the New Year but also their taxes.
Owners/general manager have to review their financial statements. They have to know their chart of accounts and how those accounts are being used within their financials. Do not allow for improper use of accounts – this can have a dramatic effect in so many areas of the business. From budgeting, forecasting, hiring, firing, purchases, and last but not least once again…taxes! I cannot say it enough…proper account use is critical!!!
What were to happen if you looked at your Income Statement and most of your expenses were lumped into Miscellaneous? Would you know where you’re spending your money, does this tell you anything? No! All this tells you, is that you’re spending money it doesn’t tell you where or on what. What if half of the materials that you purchased for the year were entered into Miscellaneous, can you job cost with that?
Ok Ok let me get back on track with the owners/general managers responsibilities. It continues on to include but is not limited to verifying insurance coverage, Capital Gains/Losses, Capital Expenditures, pricing structures, dividends paid, labor costs, equipment and material costs, and so much more.
Make sure you take the time as an owner/general manager to complete all that is required of you. Know that your business is ready to head into the New Year with everything in order. Take control.
The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accounting, marketing, technology and more. Be sure to subscribe to stay up to date with new content as it is posted. The blog was created by The Neat Company and receives contributed content from a group of contributing companies that provide technology, services and solutions to small businesses.