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How to close off business for 2021 | Bookkeeping | Accounting


What better way is there than to prepare for the future by reflecting on your progress? This is why KPIs (key performance indicators) are so important. “It is better to move forward, than to move fast and backwards”. Now, how do you measure that you’re really going forward? 

What do the books say about revenue growth? The “books” are a business’s revenue, expense and income summary reports. Lucky for you if you are using an accounting software, it automatically closes your income and expense accounts at year end before adding your net profit (or loss) to your retained earnings account. If you have not automated this process and recording in your books manually, read on. 

Closing the books annually lets businesses draw up financial statements that give business owners insights into their business’s financial health. This also helps you to properly file for your income tax returns. 

Here are 5 things you need to do before you close off the business year: 

* Monetize all invoices.

Be sure to send out reminders to clients on outstanding payments and that all the invoices are being monetized. If some clients don’t pay you, you can write the invoices off as bad debt (or if you think they are never going to pay you-this is why contract agreements are important). Follow up on invoices and payments, and make sure all the business money has reached the business account. 

* Record your expenses.

ALL your bills go onto this; from things as little as internet costs, fixed costs, to variable costs. This includes incurred business expenses, keep track of those separately; you can claim tax deductions on these.

* Reconcile bank statements.

This is a common practice for many, even for personal finance. This will help you identify discrepancies, possible bank errors, or fraudulent activity that may have happened in your account. This can also help you reflect on some transactions you have authorized, that might kill your business, canceled and uncleared checks. 

* Profit and Loss.

This reports on your business performance over the year. This shows the value of sales, expenses, and overheads and the resulting gross and net profit or loss for the year. Run it from the first day of your fiscal year to the last. 

* Balance Sheet.

This report shows the worth of your business from the day you started trading, up to the end of the fiscal year. It includes your company assets and liabilities. 

That’s a few pointers from us. Let us know what your year end closing tradition is like, we would love to hear about the different ways for different businesses.