Another year has flown by and for those of you with a December year-end, it’s time to start wrapping up your financials and preparing for the year ahead!
My gift to you this holiday season is the perfect checklist to streamline this process and to ensure that your financial records are submitted to your tax accountant in time for your filing deadline.
YEAR-END CHECKLIST for CREATIVE FIRMS:
1. TIE UP LOOSE ENDS
- For completed projects, follow up with suppliers to receive all outstanding costs so you can close the project.
2. BILL, BILL, BILL
- Work with your account team to ensure everything that can be billed has been billed.
3. ACCURATELY CAPTURE REVENUE
- Make a list of all projects where you have pre-billed your clients. At Dec 31, determine the amount of this billing that really relates to work that is to be completed next year. You should capture this revenue in the year when the work will be completed (in accounting terms, this is called deferred revenue).
4. REVIEW YOUR ACCOUNTS RECEIVABLE
- Review your Accounts Receivable list and follow up with all old outstanding invoices. Consider coming up with a provision for anything where there is risk around collection
5. REVIEW YOUR INCOME STATEMENT ACCOUNTS
- Review your income statement accounts to ensure costs look reasonable. You might want to compare your actual costs to last year’s costs or to your budget in order to help identify costs that could be missing. If you are missing costs, be sure to accrue for them before year end so your income is not overstated.
6. REVIEW YOUR BALANCE SHEET ACCOUNTS
- Review your balance sheet accounts. If your team hasn’t already, prepare a schedule to support the amounts in these accounts. This is where you’ll usually find items that should have been expensed during the year but were missed.
7. VERIFY PAYROLL
- Your payroll team will want to review your payroll reports to ensure that things like CPP and EI have been accurately captured and paid throughout the year. If not, you’ll want to make any adjustments before year-end. You will also need to accrue for unused vacation time payable next year and any bonuses relating to this year that will be paid in next year.
8. COLLECT EMPLOYEE EXPENSES
- Make sure your employees have submitted all their outstanding expense reports. You’ll be closing a lot of projects over the next month. You don’t want to lose the chance to recapture these costs from clients.
9. COMMUNICATE WITH YOUR TAX ACCOUNTANT
- Share your preliminary statements with your Tax Accountant so they have early visibility to likely net income and for founders, their personal income. By getting this information early, they are better able to provide tax planning advice. This avoids paying the government more than you need to or paying earlier than you need to.
10. PLAN AHEAD AND BUDGET ACCORDINGLY
- Finally, build your financial plan for the year ahead.. Are you planning to grow? Do you need more resources to do that? Have your overhead costs expanded beyond what they should, and do you need to optimize them? Should you invest in your employees development next year and do you have a plan to fund it? Plan for these future costs now to set yourself up for success the following year.
That’s it, 10 easy steps and best practices to ensure that your year-end goes as smooth as possible.
However, we totally get it if this is still not your thing. Closing out accounts and reconciling the books can seem overwhelming.
The good news is, we can help with that!