10 Tips to a Successful Year-End Closing

Year-end is here, but closing the books doesn’t have to feel overwhelming! With a solid plan, you can confidently wrap up your clients’ books in QuickBooks Online. These 10 tips help you tackle year-end like a pro, keeping last-minute chaos at bay and setting your clients up for a strong start in the new year. Let’s dive in and make this year-end as successful as possible!

Tip 1: Confirm Your Fiscal Year and Accrual Method

Your fiscal year setup in QBO determines when your books start fresh each year. To check or update these settings:

• Go to Gear > Account and Settings > Advanced.
• Under the Company column, check the Financial Year Start Month.

Make sure the correct accounting method (Cash or Accrual) is set. This can impact how your business is taxed, so consult prior tax returns or contact your tax accountant if you’re uncertain.

Tip 2: Review Customer Account Balances and Send Statements

Ensure your customer balances are current. Reviewing and following up on outstanding balances helps maximize year-end cash flow and keeps your records tidy. 

• Log into QBO and go to the Reports tab.
• Run the Accounts Receivable Aging Summary or Accounts Receivable Aging Detail report to identify customers with outstanding balances.
• Consider sending year-end statements to clients as a friendly reminder to settle any open invoices.

Tip 3: Clear Any Outstanding Deposits

Payments sitting in the Undeposited Funds account won’t be included in this tax year’s income. To avoid this, clear any pending deposits from the deposit queue:

• Access the Bank Deposits section in QBO and ensure all pending payments are recorded.

This step is crucial to capturing all income accurately for the year.

Tip 4: Review Vendor Balances, Pay Bills, or Write Checks

Reviewing outstanding vendor balances helps you stay on top of payables and accurately reflect liabilities for the year.

• Go to Reports and pull up the Accounts Payable Aging Summary or Accounts Payable Aging Detail report.
• Pay any remaining bills or record checks for expenses incurred during the year, if needed.

Tip 5: Reconcile All Accounts

Monthly reconciliation is essential for accurate financial records. Reconciling all accounts at year-end is even more critical:

• Go to the Reconcile tool in QBO to match bank and credit card statements with recorded transactions.
• Pay special attention to identifying and resolving any discrepancies. Reconciliations ensure accuracy across your financial statements.

Tip 6: Run Year-End Financial Reports

Run and analyze year-end financial reports to understand the company’s overall performance and pinpoint any issues. Focus on:

• Balance Sheet: Ensures all assets, liabilities, and equity balances are accurate.
• Profit and Loss: Summarizes revenue and expenses, showing overall profitability.

Carefully review these reports to address any inconsistencies, ensuring your financial statements reflect accurate data.

Tip 7: Distribute 1099s as Needed

If you have vendors who require 1099 forms, year-end is the time to review their payments and prepare the forms:

• Use the Profit and Loss by Account report to identify 1099-eligible vendors.
• Ensure all eligible vendors are correctly tracked for 1099 purposes in QBO. You can then generate 1099s directly from the system.

Tip 8: Reclassify Transactions as Needed

Misclassified transactions can skew financial reports and affect decision-making. Use the Reclassify Transactions tool in QBO to fix any misclassifications:

• Review the Profit and Loss report for unusual entries.
• Use the reclassify tool to transfer transactions to the correct accounts or classes. This keeps your records organized and accurate.

Tip 9. Close Your Books

Closing your books locks past transactions and prevents accidental changes that could alter your financial statements:

• Go to Gear > Account and Settings > Advanced and enable the “Close the books” feature.
• Set a password if you want to restrict further changes. This is a best practice to protect your historical data integrity.

Tip 10. Prep for Taxes

If you’re a tax professional or working with one, the “Prep for Taxes” tool in QBO Accountant offers a step-by-step guide to finalizing your client’s return:

• Use the “Prep for Taxes” section under the Accountant toolbox to verify critical information and compile required tax documents.

Following these 10 steps will set you up for a stress-free and accurate year-end close. Ready to learn more? Check out this article about customizing reports for 1099s in QuickBooks Online Advanced. 

Looking for templates? Download this Google Sheet Template I created for year-end.

Check out the Canopy Task Template for Year-End