The Year End Bookkeeping Checklist Every Small Business Should Complete Before December 31

The Year End Bookkeeping Checklist Every Small Business Should Complete Before December 31

The end of the year always arrives faster than expected. One minute you are planning goals for the year and the next you are staring down tax season. December is the most important month for catching up, cleaning up, and preparing your books for a smooth start to the new year. At KB2 Bookkeeping and Tax, we spend every December helping business owners straighten out the small things that make a big difference at tax time.

If you want clean books, accurate financials, and the lowest possible tax liability, here is the exact year end checklist every small business should complete before December 31.

Reconcile Every Bank, Credit Card, and Loan Account

Your books must match your actual financial statements. Reconciliation confirms that every deposit and expense has been recorded correctly. It also uncovers errors, duplicate charges, missing deposits, and forgotten subscriptions.

You should reconcile all business accounts including checking, savings, credit cards, lines of credit, loans, and payment processors such as PayPal or Stripe. If the balances do not match, your tax return will not be accurate.

Review All Income for Accuracy

Not every bank deposit is income. We often see loans, owner contributions, and transfers incorrectly categorized as revenue. This can inflate your taxable income and raise your tax bill unnecessarily.

Verify that all income recorded matches what you invoiced and what you actually earned. Remove anything that was not true business revenue and recategorize it properly.

Categorize and Clean Up All Expenses

December is the perfect time to clean up messy categories. Look for transactions sitting in uncategorized expense, ask your bookkeeper questions about unclear purchases, and make sure each expense is assigned to the correct category.

Accurate categories help you:

• understand what you spent

• support your deductions

• identify areas where costs can be reduced

• prepare for tax filing with clarity

If something was a personal purchase, mark it as an owner draw so your financials stay clean.

Collect and Organize All Receipts and Documentation

The IRS requires documentation to support every deduction. Digital copies are perfectly acceptable. Scan receipts, save emailed invoices, organize statements, and make sure everything is stored in one consistent place.

This protects your deductions and prevents last minute scrambling during tax season.

Review and Record Mileage for the Year

Mileage is one of the most commonly missed deductions. If you did not track mileage all year, you can still recreate it using Google Maps, your calendar, or (Coming soon!) the KB2 Mileage Tracker.

Record your business mileage now so you do not lose hundreds or even thousands of dollars in deductions.

Confirm Payroll Records and Prepare Contractor Information

If you have employees, make sure payroll reports align with your books. Review W2 totals, verify employee information, and confirm all payroll tax filings are up to date.

If you paid contractors more than six hundred dollars during the year, make sure you have a W9 from each one. Clean records now make January’s 1099 filings much easier.

Review Owner Draws and Owner Pay

At year end, owners often take irregular draws that need to be categorized correctly. Clean up any personal charges, confirm all owner pay is recorded, and ensure draws are not recorded as expenses. This keeps your financial statements accurate and your tax return correct.

Check Your Accounts Receivable and Accounts Payable

Look at unpaid customer invoices and vendor bills. Decide what is collectible, what needs follow up, and what should be written off before year end.

This improves cash flow reporting and provides a more accurate picture of your year.

Take Inventory if Your Business Holds Stock

If you sell products or materials, you must count your year end inventory. This affects your cost of goods sold and your taxable income.

Inventory should be counted, valued, and recorded as close to December 31 as possible.

Review Your Financial Reports

Your profit and loss statement, balance sheet, and cash flow report tell the full story of your year. They help you identify trends, problem areas, and opportunities for growth.

Year end is the ideal time to evaluate:

• profitability• expenses you can reduce

• pricing adjustments

• cash flow patterns

• tax planning needs

Clear reports help you enter the new year with strong insight and a solid plan.

Start the New Year With Clean and Confident Books

Year end bookkeeping is one of the smartest steps you can take as a business owner. It protects your deductions, keeps your books accurate, and sets you up for a strong start to the new year. When your numbers are clean, you can make better decisions, plan with confidence, and avoid the stress that comes from trying to fix everything during tax season.

If you want support getting your books caught up or cleaned up before the year closes, KB2 Bookkeeping and Tax is here to help. We work with business owners across Texas to create financial clarity, reduce stress, and prepare for a smooth tax season.

Your business deserves clear books, accurate records, and a team that has your back.

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