Closing Out the Fiscal Year: Accounting Tasks Your Business Shouldn’t Skip

A thorough year-end closing process helps prevent errors, streamlines tax preparation and provides insights for better financial planning. Ignoring critical accounting steps can lead to discrepancies, penalties or missed opportunities for financial optimization.

If you want to ensure nothing is missed this year, you may benefit from making and following a checklist of all your close out tasks before the end of your fiscal year and tax deadline.

Reconcile All Accounts

Before finalizing your books, conduct a comprehensive reconciliation of all financial accounts. If you stay on top of your own accounting using QuickBooks or another platform, you may be able to do this task yourself. However, working with an experienced accountant can be beneficial. You should ideally be reconciling:



• Bank accounts
• Credit cards
• Accounts receivable (outstanding invoices)
• Accounts payable (unpaid bills)

Ensure that your records match bank statements and other financial documents. Discrepancies should be investigated and corrected before closing the books. Catching errors early can prevent financial misstatements and potential tax issues.

Review Accounts Receivable and Collect Outstanding Invoices

Unpaid invoices can negatively impact cash flow, so now is the time to follow up on outstanding payments.

• Send reminders to clients with overdue balances.
• Offer payment plans if necessary to collect revenue before the end of your fiscal year.
• Write off bad debts before preparing your taxes if they are unlikely to be collected.

Clearing up outstanding receivables before closing the books ensures accurate revenue reporting, improves your cash position and can create tax-savings opportunities.

Verify Accounts Payable and Settle Debts

Review all outstanding vendor invoices and pay any due balances to avoid late fees or strained supplier relationships. If possible, make payments before the year ends to claim eligible expenses for tax deductions.

Ensure that all expenses are recorded in the correct accounting period. Accrue expenses for services received but not yet billed to ensure financial statements reflect true obligations.

Conduct an Inventory Count

For businesses that manage inventory, an accurate year-end inventory count is essential for proper financial reporting and tax calculations.

• Compare physical inventory to recorded stock levels.
• Adjust discrepancies due to loss, damage or theft.
• Write off obsolete or unsellable inventory.

Inventory valuation affects cost of goods sold (COGS), which directly impacts profitability and tax liability.

Ensuring accurate records prevents overstatement or understatement of inventory-related expenses.

Assess Fixed Assets and Depreciation

Review your company’s fixed assets—such as equipment, vehicles and property—to update depreciation schedules and determine if any assets need to be retired or sold. This process should include:

• Ensuring depreciation expenses are recorded correctly.
• Removing disposed or obsolete assets from financial records.
• Evaluating whether new purchases qualify for accelerated depreciation or deductions.

Proper fixed asset accounting ensures accurate financial reporting and positions you to maximize your tax savings for the fiscal year.

Prepare for Tax Obligations and Deductions

Year-end is a critical time to review tax liabilities and identify potential deductions. An experienced business tax professional or accountant can help you:

• Estimate taxes owed and make necessary payments to avoid penalties.
  
  
• Maximize deductions by documenting eligible business expenses, such as office supplies, travel costs and home office expenses.
  
  
• Determine whether deferring income or accelerating expenses could put you in a more advantageous tax position.

If your business operates on a fiscal year separate from the calendar year, ensure that tax planning aligns with your reporting deadlines.

Generate Year-End Financial Reports

Accurate financial reporting provides insights into your company’s performance and can help ensure your decision-making is informed by accurate and relevant KPIs. For most businesses, the key reports will be:

• Profit and Loss Statement (Income Statement): Summarizes revenue, expenses and net profit for the year.
  
  
• Balance Sheet: Provides a snapshot of assets, liabilities and equity.
  
  
• Cash Flow Statement: Tracks cash inflows and outflows so you can get an accurate picture of your current liquidity.

Reviewing these reports helps identify financial strengths and weaknesses while guiding budget planning for the next year.

Review Payroll and Employee Benefits

Ensure all payroll records are accurate and up to date, especially for tax reporting purposes. Verify:

• Employee wages, bonuses and benefits are properly documented.
• Payroll taxes and withholdings are correctly calculated and reported.
• Year-end tax forms (W-2s, 1099s) are prepared for distribution.

Additionally, evaluate your company’s benefits programs, such as retirement contributions or healthcare plans, to determine if adjustments are needed for the upcoming year.

Evaluate Budget Performance and Set Goals for Next Year

Compare actual financial performance against the budget set at the beginning of the year. Identify variances to determine areas for improvement, as well as where you exceeded expectations.

• Were revenue targets met?
• Did expenses align with expectations?
• What financial trends emerged that should influence next year’s strategy?

This data isn’t just important for a year-end performance review. It is key for establishing a realistic budget for the upcoming year and will help you set measurable, realistic financial goals and allocate resources efficiently.

Back Up and Secure Financial Records

Protecting your financial data is just as important as reviewing it. Ensure that all records—including accounting software data, invoices, receipts, and tax documents—are securely backed up.

• Store copies in cloud-based accounting systems or external hard drives.
  
  
• Restrict access to sensitive financial information to prevent unauthorized modifications.
  
  
• Ensure compliance with your own internal data security and retention policies as well as any regulatory requirements you may be subject to.

Having a secure record-keeping system helps with audits, tax filings and financial planning while minimizing the risk of data loss.

An Accurate Fiscal Year Analysis Can Be Key to Future Success 

It’s difficult to improve your business if you don’t have a clear picture of its performance. A well-organized year-end closeout process ensures you have the data to make actionable plans for improvement or to continue positive trends.

The business accounting and tax preparation team at H&H Accounting Services can assist with reconciling accounts, managing receivables and payables, reviewing financial reports and preparing for tax obligations. Call us at (480) 561-5805 and let us help your business avoid costly mistakes and position itself for future success.