Year-End Accounting & Human Resource Tips for Small Businesses

Year-end Finance/Accounting Tips

Balance Sheet

First, check the Balance Sheet, which contains your assets, liabilities, and equity accounts. Complete the following:

• Reconcile checking, savings and credit card accounts. Watch for uncleared or duplicate deposits and checks.
• Reconcile all loan accounts. Principal and interest amounts should be separated.
• Clean up Accounts Receivable. What is uncollectible? Issue credit memos. Ensure all invoices are entered for sales and income earned in the year.
• Review Accounts Payable. Ensure all bills are entered for expenses incurred in the year.
• If you have inventory, make a year-end adjustment.
• Review other balance sheet accounts to ensure accuracy.

Profit & Loss Statement

Next, review your Profit & Loss Statement. This includes your income, cost of goods sold, and expense accounts. Complete the following:

• Look for Fixed Asset purchases posted incorrectly to expense accounts. A single item purchase over $2500 is considered a Fixed Asset, not an expense.
• Confirm that loan payments are posted to the corresponding liability account, not to an expense account.
• Check for owner/personal expenses that need to be reclassified as equity distributions/draws.
• Check for business expenses paid with personal funds which need to be added.
• Clean up uncategorized income and expenses.
• Recategorize miscellaneous expenses whenever possible.
• Check for accounts that should be merged. For example, could you merge “Office Expenses” and “Office Supplies” into one account?

1099-MISC preparation

A 1099-MISC is due to anyone (corporations excluded) that you have paid with cash, check, direct deposit, or EFT throughout the year for eligible services such as:

• rents
• services performed by someone who is not your employee
• prizes and awards
• other income payments
• medical and health care payments
• crop insurance proceeds
• payments to an attorney

For a complete list, visit the IRS website at https://www.irs.gov/forms-pubs/about-form-1099-misc.

1099-MISC forms must be filed by January 31^st. Starting early will allow you time to collect needed W-9s from your vendors.

2017 Tax Cuts and Jobs Act

As you prepare for tax filing in 2020, remember that the 2017 Tax Cuts and Jobs Act changed if/how meals and entertainment can be deducted. In all situations, we recommend that you keep receipts and write the justification for the deduction on the receipt. If your accounting software allows it, we recommend that you upload the receipt and attach it to your transaction (easy to do in QuickBooks!).

Meals and entertainment deductions follow this general guideline:

• Entertaining clients (tickets, golf event, games, etc.) – 0%. Possible deduction as a promotion/advertising expense, depending on the business purpose.
• Business meal with clients – 50%
• Office snacks and meals – 50%
• Occasional Company-wide picnic/party – 100%
• Meals & Entertainment included in compensation – 100%

For expenses you may still have questions about, talk to your tax accountant or see the IRS website at: https://www.irs.gov/newsroom/irs-issues-guidance-on-tax-cuts-and-jobs-act-changes-on-business-expense-deductions-for-meals-entertainment

Year-end People Tips

After reviewing your financials, you will want to be sure that you are also reviewing an invaluable part of your business – your people!

Annual Reviews

Feedback is a great way to show employees that they matter. Annual reviews are a great tool to share progress and growth and discuss future goals.

If doing all the reviews at year’s end seems overwhelming to you, consider doing them at the employee’s anniversary date. You will need to plan for that, however. We suggest putting it on your calendar 30 days before their anniversary date and commit to it when the calendar reminder pops up!

Consider the following when preparing for a performance evaluation:

• Create a self-evaluation form and give to each employee to complete
• Create a supervisor/manager evaluation form and have the supervisor/manager complete
• Schedule a time with the employee for a one-on-one review.
• Determine if merit raises will be given. If so, determine appropriate raises for each person based on completed evaluations.

Bonus

A discretionary bonus is a way to show appreciation to your employees (and no, they don’t want a Jelly of the Month Club certificate!). In determining whether you give an end of the year bonus, consider the following:

• How did the company do financially for the year? If company was profitable, consider profit sharing or a bonus option for employees to reward them for their contributions. This can boost the morale of the employees which leads to retention and a competitive position in job market.
• Set the expectation that this is one-time and should not be expected annually.
• Determine overall budget and individual amounts to be awarded (performance based, flat rate, etc.)
  • Can be a separate check or included as a part of their regular check, but it must be included in employee compensation on W-2 and is subject to the usual FICA, State and Federal taxes.

Holiday Party

A holiday party is a great opportunity for employees to get together outside of work, have fun, and feel more connected to the company. The culture you create in your company is so important and having a holiday party can help to solidify a solid company culture.

• Plan early so people can get it on their calendar. With so much going on this time of year, don’t wait until the last minute!
• Create a budget. Hint: It doesn’t have to be big!
• Solicit feedback from your employees on what to do, where to go and when to have it. There’s nothing worse than planning an activity that YOU think is fun but is not appealing to your employees.
• Coordinate details: schedule venue, arrange transportation, order food, etc.
• Plan to minimize employer liability for alcohol consumption.

Time to plan ahead

Finally, as 2019 comes to a close, we recommend that you take some time to plan for 2020! They say that “failing to plan is planning to fail.” We want all small businesses to grow and prosper in 2020, so take some time to:

• Plan monthly, quarterly and annual goals.
• Discuss the goals with your employees – for their input and so that they feel ownership of the goals.
• Accountability for each goal – determine the starting steps and who has responsibility for each goal.

If you ever need help with your finances or your employees, get in touch with us. We offer a free 30-minute consultation and we’d love to help you out!

If you found this information helpful, we would love for you to share this article with someone else!