9 Things to put on your accounting checklist for the seasonal shutdown

After a grueling year for small business owners, running through an accounting checklist before the seasonal shutdown might be the last thing on your mind. However, setting some time aside for financial housekeeping, book balancing and budgeting can help you enter the New Year with the confidence that comes from good preparation.

These closing weeks of the year can be a good time to take stock of your business’s performance and set some New Year’s resolutions that will set you on the path to success. Here is a nine-item accounting checklist that will help you end 2020 on the right note.

1. Calculate leave pay and leave balances.

2. Make sure your bonus calculations are correct.

3. Planning your staffing needs for 2021.

4. Consider doing a stock take.

5. Get on the phone to your creditors.

6. Determine your cash position.

7. Get your tax documents together for financial year-end.

8. Evaluate your financial performance.

9. Do your forecasts for the year to come.

Related: Giving your small business an annual spring clean

Let’s jump into the accounting checklist.

1. Calculate leave pay and leave balances

According to the Basic Conditions of Employment Act (BCEA), each full-time employee is entitled to 21 consecutive days’ annual leave (with full remuneration) during each leave cycle. The end of the calendar year is an opportune time to check that employees aren’t stockpiling leave days or that there aren’t any who owe you leave days. Encourage those who have leave days outstanding to use them before the end of the year.

2. Make sure your bonus calculations are correct

If it’s your practice to pay 13th cheques or end-of-year bonuses according to company or individual performance, you have probably done the calculations already. However, it’s wise to let employees know what they can expect well ahead of the pay run so that they can adjust their expectations and financial plans accordingly.

3. Plan your staffing needs for 2021

The beginning of the year can be a good time to recruit with many university and school leavers entering the job market or professionals eager to get a new start. As you plan for the year to come, think about the people you’ll need to recruit, the value you would want them to add, and how much you would want to pay them.

4. Consider doing a stock take

If you keep a lot of inventory, be it products you sell or parts and consumables your business depends on, the end of the year could be a good time to do a stock take. You might want to get an order in for early next year if you’re running low. Conversely, you might want to put some items on sale if you’re carrying excess inventory. A physical count can alert you to shrinkage and other issues, even if you run inventory management software.

5. Get on the phone to your creditors

The end of the year is a time when many companies and individuals let payments slip, figuring they can sort it out in the New Year. The result could be a cash flow crunch as your debit orders go off while your creditors defer payment until next year. The effects can be even worse if you need to make VAT or PAYE payments before you get the money from your customers.

It’s often worthwhile, therefore, to check with larger creditors when they will pay their December accounts. Also, it’s a good idea to chase down people with large overdue accounts ahead of year-end. A sweetener for prompt payment or a firm letter can help to bring some of the outstanding debt in.

Related: 6 ways that small businesses can address late payments with their clients

6. Determine your cash position

The beginning and end of a year can be financially tricky, with late customer payments, staff seeking loans to pay school fees or travel home, and other unusual costs. When doing your accounting checklist, it’s not a bad idea to review your cash position to ensure that you’ll have enough money coming into your bank account to pay for your December and January expenses. If you see a potential shortfall, you can at least plan for it by, for instance, letting suppliers know payment will be late or asking the bank for an overdraft.

7. Get your tax documents together for financial year-end

Depending on when your financial year-end is, December can be an opportune time to start getting receipts and other documents together for your tax year-end. If you have allowed yourself to get behind on your admin, you can catch up and make a resolution to stay on top of paperwork from the New Year onwards.

8. Evaluate your financial performance

Even if it’s not financial year-end, 2020 has been an unusual year, and the December holiday could be the right time to evaluate how the pandemic has affected business. Draw up a profit and loss statement to see how your income and expenses were affected. What patterns did you see during the various levels of lockdown? What can you expect in the year to come?

9. Do your forecasts and planning for the year to come

After you’ve attended to the basic housekeeping tasks on your accounting checklist, you can take some time for strategic planning. You could work with your accountant to draw up some forecasts and scenarios for the year ahead, and then set some goals for your business. With that done, you can draw up an action plan to start from the first day of the New Year.