Keeping all financial records of your business is highly important to run the business smoothly. These records help a firm to detect profit and losses in order to estimate its growth and various other financial patterns. It is an essential legal requirement to keep the financial records in the prescribed manner. Among other things, this allows you to have an easy closing at the end of the financial year as all the financial records are already in place.
For new business owners, it can be confusing to understand what goes into a fiscal year closing. Even if you have an accountant or retainer working with you, it is highly important to keep a track of financial records yourself. It develops a sense of good business in you and as a business owner, you will know what exactly is happening with your money.
Some steps for preparing the books for year-end accounts are mentioned here.
Review Your Profit and Loss Statements: You will get a snapshot of your business’s financial performance through the profit and loss statements. You will realise what your revenues looks like and you can anticipate any large expenses that may hit your books. You can evaluate how much money you have available and you can check whether it will be wise to make big purchases at this time of the year. Keep a check on the expense accounts of large items and smaller recurring expenses, so you know if anything is going out of line.
Verify Your Vendor and Lender Files: You should not forget to review the paperwork associated with any of your vendors along with the information related to outstanding loans. Make sure that all your vendor forms are accurate and properly filled up. You also have to ensure that the information has been correctly input in your system so that it will populate the forms and accounts correctly when printed.
Take Inventory: If you are into selling products, then you should conduct an inventory assessment and compare it with the previous inventory report. Make the necessary adjustments to have an accurate account of how much capital you have wrapped in your current inventory. Even if you are not into selling items but rather sell services, it is a good idea to take an inventory of elements in your office such as equipment, computers, office supplies, etc.
Create a Budget for the Following Year: It is always better to plan early, and you can always prepare a financial plan for your business at the end of your fiscal year. When you are reviewing the accounts of the current year, you will see a pattern in things which you need to factor in the budget for the next fiscal year. When you will see the expenditures and stock of the ending year, you will have a better understanding of where to focus your efforts to move ahead in the business.