Start with a short plan and a quiet block of time
Pick a start date a few weeks before the year ends, so you can fix problems while the year is still open and memories are fresh. Block a few hours at a time. Year-end work goes faster in short, focused sessions than in one long one.
Decide where the finished records will live. A single folder for the year, with one sub-folder for each topic below, keeps everything in one place. Give files plain names with the date and the vendor so you can find them later. If you use accounting software such as QuickBooks Online, make sure you know which user can run reports and which user can lock or close a period.
Reconcile every account, not just the checking account
A reconciliation compares your books to the bank or card statement and explains any difference. Do it for every account that holds or owes money: each checking and savings account, each credit card, any loan or line of credit, any payment processor balance, and any petty cash. Reconcile through the last statement of the year, and then again through the first statement of the new year if the closing date falls mid-cycle.
If a reconciliation will not balance, look for the usual causes. A transaction was entered twice, a deposit was recorded as income when it was a transfer, a check never cleared, or a bank fee was missed. Work backward from the date the account last balanced. Keep a copy of each completed reconciliation report with the year's files.
Do not force a balance with a plug entry. A made-up adjustment hides the problem and will cause questions later. If you cannot find a difference, write down the amount and the accounts involved and ask your bookkeeper or accountant.
Clear uncategorized and unsorted transactions
Run a report of transactions that sit in an uncategorized, ask-my-accountant or suspense account. Each one needs a real category, a note about what it was, or a flag for questions. Look closely at owner payments in and out, transfers between your own accounts, refunds, sales tax or payment processor fees, and anything personal that went through the business account.
Also look for categories used inconsistently. Meals, supplies, software and travel are often split across several similar categories. You do not need a perfect chart of accounts, but each kind of cost should land in one place all year. If you plan to merge categories, do it before you hand over the books, and tell your accountant what you changed.
Set your cutoff: unpaid invoices and unpaid bills
The cutoff decides which year each item belongs to. For customer invoices, list every invoice that is open at year end and check that it is dated correctly. Mark any that look unlikely to be paid and ask your accountant how to treat them. Match payments received in the new year to the right invoices rather than to the last one open.
For bills, enter every bill you received for work done or goods received before year end, even if you will pay it in January. Then check the first weeks of the new year for bills that actually belong to the old year. If you keep your books on a cash basis, ask your accountant how they want open invoices and bills reported, because the approach depends on your method.
Print or save an aged receivables report and an aged payables report as of the last day of the year. These two reports are what an accountant will ask for first.
Want us to handle it?
We close the year with you: accounts reconciled, 1099s sorted, and books your tax preparer can use.
Price: Free review of your books first, then a written quote before any work starts.
Review inventory, fixed assets, loans and owner activity
If you hold inventory, plan a count as close to year end as you can. Write down the quantity and the unit cost for each item, and note anything damaged or unsellable. Keep the count sheets. If you do not track inventory in the books, ask your accountant what they want to see.
For equipment, vehicles and other large purchases, make a list of what you bought, what you sold or disposed of, and the dates and prices. Keep the invoice for each. How these purchases are treated for tax is a decision for a tax professional. Your job is to have the documents together.
Check the balance sheet accounts for oddities: loan balances that do not match the lender's statement, a deposit that should have been returned, a negative balance somewhere that makes no sense, or an old balance nobody can explain. Match loan balances to the year-end lender statement, and note the principal and interest paid so the two are not mixed up.
Owner draws and contributions should be recorded as such, not as expenses or income. Review the year's activity in those accounts and make sure each transaction is coded the same way. If the business paid something personal, or you paid something for the business out of pocket, make sure it is recorded and explained. If you lent money to the business or borrowed from it, write down the amounts, dates and repayment terms, and keep the agreement if there is one. How these are treated for tax depends on your business structure, so ask your accountant.
Gather mileage, receipts, payroll and contractor records
For vehicle use, finish the mileage log through the last day of the year. A usable log shows the date, the starting place, the destination, the business reason and the miles. If you did not keep one, rebuild it from your calendar and appointment records now, and note that it was rebuilt. Ask your tax professional what they need.
Collect receipts that support the larger or unusual expenses. Paper receipts fade, so photograph them. Match them to the transactions, or store them in a folder named by month.
If you have employees, gather payroll reports for the year and the filings and payment confirmations your payroll provider holds. If you paid independent contractors, build a list with each person's name, address, taxpayer ID status and total paid. Check that you have a signed W-9 on file for each one. Which forms are needed and when they must go out are questions for the IRS instructions, the NJ Division of Taxation or your tax professional.
Back up the records and build the accountant package
Make a copy of the year's records outside the system they live in. Export the main reports to PDF or a spreadsheet and save them with the receipts and statements. Keep one copy in the cloud and one on a drive you control. Ask your tax professional how long to keep records, and do not delete anything until you have their answer.
A good package for an accountant usually includes: the profit and loss and balance sheet for the year, the general ledger or transaction detail, the completed reconciliations, aged receivables and payables, the loan statements, the fixed asset list, the mileage log, payroll reports, the contractor list with W-9s, and a short note listing anything unusual that happened during the year. For help organizing a sole proprietor's year, see the toolkit at /toolkits/sole-proprietor-tax-time-organizer. If you want a repeatable monthly routine that makes year-end easier, see the toolkit at /toolkits/month-end-close-workbook.
Worked example with numbers
In January, reconcile all accounts through December 31 and confirm each ties: bank $24,310, card $3,120 owed, loan $41,000 per lender statement. Run payroll and sales tax reports for the year, review the open bills and invoices, and send the preparer package with the profit and loss, balance sheet, trial balance and fixed asset list.
Mistakes that cost money
Starting in March. Forgetting year-end accruals. Not reconciling the card. Sending a package with unexplained items.
Check your work
Ask your preparer what they need in what format, and use their list.
Common questions
When should I start my year-end bookkeeping?
Start a few weeks before the year ends if you can. That leaves time to chase missing receipts and fix reconciliation problems while the year is still open. If the year has already ended, start with the reconciliations and work down this list.
What do I do if I am missing receipts or statements?
Download bank and card statements again from your bank. For vendors, ask for a copy of the invoice or find it in your email. If a receipt cannot be found, write a short note about what the purchase was for. Ask your tax professional how to handle gaps.
Can I close the books myself, or do I need an accountant?
Many owners do the cleanup themselves and hand the finished records to an accountant. Using a bookkeeper or accountant is a good idea if reconciliations will not balance, if you have payroll or inventory, or if you are unsure how something should be recorded.
Does this checklist tell me what is deductible or when things are due?
No. This checklist is about organizing records. Tax treatment and due dates are set by the IRS and the NJ Division of Taxation and depend on your situation, so confirm them with those agencies or a tax professional. MCC Solutions LLC offers bookkeeping support if you want help getting the records in order.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.