From tax prep to bookkeeping, here’s everything you need to know about closing your business books and preparing for the new year.
As the year draws to a close, it’s easy to get caught up in the excitement of holidays and the promise of a fresh start. But before you can fully step into the new year, there’s one crucial task that needs your attention—closing out your business’s financial year.
For many entrepreneurs, this process can feel overwhelming, especially if you’re not a numbers person. But closing out your books and preparing for tax season doesn’t have to be stressful. In fact, with a few key strategies and a clear plan, you can tie up your financial loose ends and start the new year with confidence and clarity.
In this post, I’ll walk you through the essential steps for closing out your business’s financial year—from reviewing your financial records to preparing for taxes—so you can feel organized and financially ready for 2025.
1. Review and Reconcile Your Financial Records
The first step in closing out your financial year is to review and reconcile all of your financial records. This means making sure that your income, expenses, and bank accounts are accurate and up to date. By doing this, you’ll catch any discrepancies and ensure that your financial statements are accurate.
How to do it:
- Gather your financial statements. Pull together all of your financial statements, including bank statements, credit card statements, and invoices.
- Reconcile accounts. Use accounting software like QuickBooks or Xero to reconcile your accounts. This means making sure that the transactions recorded in your software match those in your bank accounts.
- Address discrepancies. If there are any discrepancies, investigate them and make the necessary adjustments.
2. Organize Receipts and Track Deductions
Next, take some time to organize all of your business receipts and track your tax-deductible expenses. This will make it much easier when it’s time to file your taxes, and it ensures that you’re not leaving any money on the table when it comes to deductions.
How to do it:
- Categorize your expenses. Organize your receipts into categories like office supplies, travel, marketing, and professional services.
- Track tax-deductible expenses. Common deductions for small business owners include office supplies, software, marketing costs, travel expenses, and home office expenses.
- Digitize your receipts. If you haven’t already, consider using a tool like Receipt Bank to digitize and organize your receipts.
3. Pay Off Any Outstanding Business Expenses
If you have any outstanding bills or expenses, now is the time to pay them off. By settling your business expenses before the year ends, you’ll not only start the new year with a clean slate but also ensure that you can claim those expenses on this year’s tax return.
How to do it:
- Review unpaid invoices. Go through your accounting software and identify any outstanding vendor payments or bills that need to be settled.
- Pay off credit card balances. If you’ve been using a business credit card, consider paying off the balance to avoid starting the new year with debt.
4. Prepare for Tax Season
Tax season is just around the corner, so now is the time to prepare. By getting organized now, you’ll avoid the last-minute scramble and ensure that your tax return is accurate and complete.
How to do it:
- Estimate your tax liability. If you’re a sole proprietor or LLC, estimate your tax liability based on your income and expenses for the year.
- Maximize your deductions. Review your expenses and identify any last-minute deductions, such as home office expenses, depreciation, or retirement contributions.
- Work with a tax professional. If taxes aren’t your strong suit, consider working with an accountant or tax professional to ensure that you’re maximizing deductions and filing correctly.
5. Set Financial Goals for 2025
Once you’ve closed out your books and prepared for taxes, it’s time to think about the year ahead. Set clear financial goals for your business in 2025, whether that’s increasing revenue, reducing expenses, or improving cash flow.
How to do it:
- Review your financial performance. Look back at your financials for the year and identify areas where you can improve.
- Set revenue and profit targets. Establish clear financial goals for the new year, including revenue, profit, and expense targets.
- Create a budget. Develop a budget that aligns with your goals and helps you stay on track financially throughout the year.
Closing Out Your Financial Year
Closing out your financial year doesn’t have to be overwhelming. By following these steps, you’ll be able to organize your financials, prepare for tax season, and set yourself up for a successful 2025. Taking the time now to tie up financial loose ends will give you peace of mind and a fresh start in the new year.
