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Hello Community! Today we will be going over best practices for closing out your year and preparing for filing.
In our last Answer Room event, hosted on the QuickBooks Community Facebook page, we covered what steps you should take when you end the year to ensure that your books are in good standing as you step into 2024. The tips we covered are specific to QuickBooks Online. If you are closing out your year using a different QuickBooks product, or if you would like to view the detailed year end guide for QuickBooks Online, please select it from the list below for a year end guide that is tailored to your product.
So let's review what we discussed!
Review your fiscal year settings
Review Customer and Vendor Account Balances
Clear Outstanding Deposits and Reconcile Accounts
Review your fiscal year settings
The first step we recommend as you prepare for year end is to review the first month of your fiscal year. By doing this, you’ll allow QuickBooks Online to clear your accounting ledgers for you while you wrap up the other items on your to-do list.
For anyone who doesn’t already know how to review your accounting period start date, you can follow the steps shown in the video below.
Review Customer and Vendor Account Balances
The next step you can take is to review your customer account balances. This gives you an opportunity to ensure that all of their payments are current and review any outstanding balances each customer may have.
The great news is that you don’t have to go customer by customer for this process. You can just go to your Reports and run either the Accounts Receivable Aging Summary report or the Accounts Receivable Aging Detail report. Then you can look the report over and identify any customers who have outstanding balances and send them statements if needed.
We know bills aren’t as fun to review as income is, but it’s also a great practice to take some time and go review your vendor account balances. This way you can see if you have any outstanding bills, credits, discounts, or products that need addressing.
This is a very similar process to reviewing your customer balances. You just need to go to your reports and look for the Accounts Payable reports instead of Accounts Receivable. So you can run either the Accounts Payable Aging Summary or the Accounts Payable Aging Detail reports, and look those over for any balances that need taken care of.
If you do find some outstanding bills, you can use check or bill payments to get those settled before the year is over.
Clear Outstanding Deposits and Reconcile Accounts
Clear Outstanding Deposits
You also want to check in on your bank deposits to see if any are showing as outstanding that may need cleared. If you have payments in your undeposited funds account you can create and record bank deposits for those now so that all of your payments are accurately accounted for in your current year’s income.
Reconcile Your Accounts
Okay, our next step is reconciling. As we’ve said so many times before, reconciling on a monthly basis is a life saver when it comes to year end, so hopefully you have all followed that advice this year. But if not, don’t worry, there’s no judgment here and we have a few tips to help with the process.
Reconciliation Tip #1: Make sure all of your bank and credit card statements for the year are handy prior to starting. That way you’re not losing time in the process trying to track each one down.
Reconciliation Tip #2: Treat those statements as the source of truth! QuickBooks needs to be matching what they say, not the other way around. So getting your QuickBooks to align with them is your end goal here.
Reconciliation Tip #3: Start with your oldest bank statement or oldest reconciliation first. Then work month by month until the year is fully reconciled. The order you do this in is very important because any issues with an earlier reconciliation are going to impact every reconciliation that follows it.
Reconciliation Tip #4: Don’t be afraid to ask for help! Whether that is reaching out to our QuickBooks support team on social media and the QuickBooks Community, or calling in your accountant to help you sift through the transactions, there is no shame in asking for help.
*Note: If you have a large number of transactions that are needing to be reconciled, they may not all appear in one window. So if you aren’t seeing everything initially, don’t panic. You can use the search and filter features to narrow that list down and see the appropriate transactions.
Run your Year End Reports
Once you’re past the reconciliation process, you get to do some lighter tasks like running your year-end reports. You can obviously run whatever reports are most beneficial to your year end review, but we do recommend creating a management report to get additional insight into your profit and loss situation.
Creating that report isn’t a difficult task at all, you just follow these steps:
- Go to your Reports tab and find the Management reports section
- Choose Create Management Report, name it, and fill out any other necessary information
- Set the Report Period and add your Balance Sheet and Profit and Loss reports
- Then click Save and Close and you’re good to go!
Also, when you review your balance sheet and profit and loss report in that process, be sure that your current net income matches what you see on both of them. If you see any discrepancies here it could be due to any filters you have in place, your fiscal year preference not being set properly, or some missing data, so it’s good to double check that everything is lining up correctly.
Final Tips
Tip #1: Distribute profits from your business as needed
This tip isn’t necessarily applicable to everyone, but just serves as a reminder if it does apply to your business model: now is the time to work with your accountant to distribute any retained earnings among your partners and/or set up an Owner’s Equity and Draws account to track your payments and withdrawals over the year.
Tip #2: Work with your accountant to prepare for filing
We highly recommend working with your accountant to prepare your tax returns and initiating this process as soon as you’re ready. You can add your accountant to your QuickBooks Online account now, if you haven’t previously, by sending them an invite under the Accountants tab in your Manage Users section.
Close Your Books
And with that, you are ready to close your books for the year. For final tips on closing the year, and step-by-step instructions on closing your books, check out this link.
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At this point, you can treat yourself to something nice and celebrate another year of business, another year of success, and another year of doing a great job managing your books!
That’s all we have to share with you today! If you’re interested in joining us for our weekly live events, you can follow us on our QuickBooks Community Facebook page.
See you next time!
