It's hard to believe we're already getting close to the end of another year! While December 31st might still feel a ways away, now is actually a great time to start getting your business finances in order. Trust me, your February 2027 self with thank November 2026 self for getting your books in order!
And while getting your books ready for taxes is important, there is also SO much more value in having accurate financial information throughout the year. You still have time to make decisions that could impact your taxes, cash flow, and how you head into the new year.
Here are some things I recommend reviewing before December 31st.
Catch Up on Your Bookkeeping
First things first, are your books actually up to date?
If you haven't categorized transactions since July, or maybe you've been keeping up with your bank feed but haven't looked much further than that, now is the time to get caught up.
Go through your bank and credit card transactions, make sure everything is categorized, and address any outstanding questions while the transactions are still somewhat fresh in your mind.
One thing I want to emphasize is that having all your transactions categorized doesn't necessarily mean your books are accurate. There is more to bookkeeping than simply accepting transactions in QuickBooks.
If you've fallen behind, DO NOT feel guilty. Don’t let that guilt consume you, because it will block you from working on it now. All business owners are under INCREDIBLE stress, things are bound to slip here and there. So here is your friendly reminder to block off a Friday and get caught up without ANY guilt!
Reconcile Your Bank and Credit Card Accounts
This is one of the most important things you can do to ensure your books are accurate!
Reconciliation is the process of comparing your books to your actual bank or credit card statements. It helps catch duplicate transactions, missing activity, and other errors that can easily go unnoticed.
Every bank and credit card account should be reconciled monthly, including accounts that aren't used very often.
I would also recommend reviewing your loan balances against your most recent statements. Loan payments are frequently recorded incorrectly, especially when the principal and interest aren't separated. —> Are you separating out the interest expense portion of your loan statements?
Take a Look at Your Balance Sheet
Most business owners are familiar with their Profit and Loss statement. They want to know how much money they made and what their expenses were. Understandably!
But your Balance Sheet is just as important, and it's often overlooked.
Your Balance Sheet is how you know the books are correct and it shows the health of your business at a particular point in time.
When reviewing your Balance Sheet, look for things that don't make sense. Do you have negative balances in accounts that shouldn't be negative? Are there old outstanding checks? Do your loan balances match your statements? Are there assets listed that your business no longer owns? Are there old bank or credit card accounts that are still showing balances incorrectly?
We regularly see Balance Sheets with errors that have been carried forward for years because no one was reviewing them.
These errors can also impact your Profit and Loss, so it's important to look at both reports.
Review Outstanding Invoices and Bills
Do you have customers who still owe you money? Or maybe invoices that were paid months ago but are still showing as outstanding in QuickBooks?
Take some time to review your Accounts Receivable Aging report and follow up on overdue invoices.
The same goes for your Accounts Payable. Review outstanding bills and make sure they are legitimate and haven't already been paid.
Not only does this help clean up your books, but it can also give you a better understanding of your cash flow heading into the new year.
And let's be real, collecting money you're already owed is a lot better than starting the new year wondering where all your cash went!
Start Preparing for Tax Season Before It's Tax Season
This is a big one!
Too often, business owners don't connect with their CPA until they're ready to file their taxes. But by that point, the year is already over and many tax planning opportunities have passed.
Once your books are caught up and accurate, I recommend sending your financial reports to your CPA before the end of the year.
A few things to review include:
Business expenses: Make sure expenses are properly categorized and large purchases are recorded correctly. If you aren’t sure if a large purchase should be an asset or expense, put it to Ask My Accountant and then ask your Tax pro when they are doing your taxes.
Fixed assets: Review equipment, vehicles, and other major purchases or disposals during the year.
Payroll: Verify payroll liabilities and make sure payroll taxes are being filed and paid correctly.
Sales tax: Review outstanding sales tax liabilities and confirm payments are recorded properly.
Contractors: Make sure you have W-9s on file for applicable contractors and review who may need a 1099.
Your CPA can also help you determine whether there are any tax planning opportunities worth considering before December 31st.
One thing I always caution business owners about is making purchases just to reduce taxes. Yes, business expenses can reduce taxable income, but spending money you don't need to spend isn't necessarily a good financial decision. You don’t want to spend $100k to save $20K unless you purchased something you actually needed or wanted.
Review How Your Business Actually Performed This Year
This is probably my favorite part of year-end bookkeeping because this is where your financial information can really start working for you.
Once your books are accurate, take some time to look at the bigger picture. Make sure you are looking at month over month OR year to date VS prior year to date to see the trends.
How did your business perform compared to last year? Did your revenue increase? What happened to your expenses? Are you actually keeping more of the money you're bringing in?
Maybe your revenue increased significantly, but your profit stayed about the same. Why is that?
Or maybe you had a really profitable year on paper, but you're constantly struggling with cash flow.
These are the kinds of questions your financial reports should help you answer.
I recommend reviewing your Profit and Loss by month and comparing it to the previous year. Look for trends, unusual expenses, and changes in profitability.
Then use that information to start planning for next year. What are your revenue goals? Are there expenses you need to get under control? Will you need to hire employees or make large purchases?
Your bookkeeping should be helping you make these decisions throughout the year, not just giving your CPA numbers to put on a tax return.
Don't Wait Until January to Get Started
I know how busy things get, especially as we head into the holidays. Bookkeeping is often one of those things that gets pushed to the bottom of the list when you're busy running your business.
But taking some time now to get your books in order can make a huge difference when tax season comes around. And if your books are a mess or you haven't touched them in months, that's okay too. The important thing is getting started before you're facing a tax deadline.
At 3 Lakes Bookkeeping, we help small business owners get caught up, clean up inaccurate books, and maintain accurate financial records throughout the year. We also go beyond simply categorizing transactions. We want our clients to understand their numbers and have the financial information they need to make good business decisions.
Need help getting your books ready for year-end?
Whether you're looking for a one-time cleanup or ongoing bookkeeping support, we'd love to connect and see how we can help!
Visit www.3lakesbookkeeping.com to learn more.
3 Lakes Bookkeeping LLC provides bookkeeping services to small businesses in Western Wisconsin, Eastern Minnesota, and virtually nationwide.