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Year-End Bookkeeping Checklist: What Every Small Business Should Review Before January 

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The end of the year is one of the busiest and most important – times for small business owners. It’s when you close out your books, prepare for tax season, and take a clear look at how your business performed. But for many business owners, year-end can feel overwhelming. There are reports to gather, accounts to reconcile, and decisions to make before the calendar resets. 

That’s exactly why a structured year-end bookkeeping checklist is so valuable. It helps you slow down, get organized, and enter January with clarity instead of chaos. 

At The Bookkeeping Lab, we believe financial understanding begins with clean, accurate numbers and year-end is the perfect opportunity to ensure your books reflect the true story of your business. Whether you manage your books yourself or work with a bookkeeper, this guide will walk you through what to review, why it matters, and how to set yourself up for a confident start to the new year. 

Review Your Profit & Loss Statement

Your Profit & Loss (P&L) tells you how much you earned, what you spent, and what you kept. But at year-end, it becomes even more important because it helps you evaluate trends you may have missed during the year. 

Questions to ask yourself: 

  • Did revenue increase or decrease compared to last year?
  • Which expenses grew unexpectedly?
  • Are there categories that need reorganizing or clarification? 


A year-end P&L comparison gives you a high-level view of your business performance. If reading your P&L feels confusing, our blog Understanding Your Numbers: The Foundation of Smarter Business Decisions can help you interpret what your numbers are truly telling you. 

Your P&L should be complete, accurate, and categorized properly before you hand your books off to your CPA – otherwise, you risk filing taxes based on incomplete information. 

Examine Your Balance Sheet for Accuracy

Your Balance Sheet shows the financial health of your business at a specific point in time. It lists everything you own (assets), everything you owe (liabilities), and your equity. 

At year-end, your Balance Sheet becomes especially important because it highlights: 

  • Outdated or incorrect asset values
  • Old vendor balances Personal expenses accidentally recorded as business expenses
  • Loan balances that don’t match bank statements 


A clean Balance Sheet means fewer surprises during tax season. This is also a great time to check that your owner draws and contributions are recorded properly – mistakes here can distort your equity and mislead your CPA. 

Reconcile All Bank, Credit Card, and Loan Accounts

If you only complete one checklist item before January, make it this one. 

Reconciliation ensures every transaction in your books matches your bank and credit card statements. If your accounts aren’t reconciled: 

  • Expenses may be missing
  • Revenue might be overstated
  • Duplicate transactions could distort your financials
  • Your cash balance may be inaccurate 

These small discrepancies add up, and year-end is the last chance to fix them before your accountant prepares your taxes. 

This is also a good time to review cleared vs. uncleared transactions. If something’s been uncleared for months, it’s worth investigating—it may be a duplicate, an error, or a transaction recorded in the wrong account. 

your purpose. 
Ask: 

  • What am I trying to achieve this year?
  • What does success look like — more revenue, more efficiency, better balance?
  • What financial habits or patterns are holding me back? 


Your answers become the foundation of a purposeful budget. 

For example, if your goal is to increase cash reserves, you’ll plan expenses differently than if you’re expanding operations or hiring staff. 

Budgeting works best when it reflects your intentions, not just your transactions. 

Clean Up Categories and Reclassify Transactions

Over the course of the year, it’s easy for transactions to land in the wrong categories. Maybe something was coded quickly, or a rule in QuickBooks Online didn’t catch the right match. Before January, take time to review your expense and income categories. 

Look for: 

  • Miscellaneous or uncategorized expenses 
  • Duplicates 
  • Personal expenses that shouldn’t be on business books 
  • Client reimbursements recorded as income 
  • Transfers miscategorized as revenue 


If you’re not sure how to correct these, our blog QuickBooks Online Simplified: Tips Every Small Business Owner Should Know offers a helpful overview of QBO categories and workflows. 

Clean categories = clean reports = better decisions. 

Verify Accounts Receivable and Accounts Payable

Your Accounts Receivable (A/R) report tells you who still owes you money. Your Accounts Payable (A/P) report tells you who you owe. 

At year-end, both reports should be reviewed carefully. 

For A/R: 

  • Are there old unpaid invoices that need follow-up? 
  • Do any invoices need to be written off? 
  • Were deposits or payments applied incorrectly? 

For A/P: 

  • Are all vendor bills entered? 
  • Do any balances look incorrect or outdated? 
  • Should any unpaid bills be cleared or voided? 


A/R and A/P directly impact your cash flow. Cleaning these reports ensures your books reflect what’s truly owed—not old balances that should have been resolved. 

Review and Update Your Inventory (If Applicable)

If your business manages products or raw materials, year-end is the ideal time for an inventory count. Physical inventory rarely matches what’s on paper unless it’s reviewed consistently. 

Your year-end inventory check should include: 

  • A physical count of all items 
  • Adjustments to match actual quantities 
  • Recording shrinkage, damage, or obsolete items 
  • Reviewing cost values for accuracy 


Proper inventory valuation is crucial for calculating cost of goods sold (COGS). If your numbers are off, your profitability may appear higher or lower than reality. 

Businesses using QuickBooks Online + SOS Inventory benefit from real-time tracking, but a manual year-end check is still a best practice. 

Review Owner Payroll, Draws, and Distributions

Many small business owners forget to organize their owner-related transactions before year-end, leading to confusion at tax time. 

Make sure: 

  • Owner draws are not recorded as expenses 
  • Distributions are categorized correctly 
  • Payroll for owners (if on payroll) matches W-2 reports 
  • Any personal expenses accidentally paid through the business are removed 


This ensures clean, compliant books and avoids complications when filing taxes. 

Prepare for Your CPA or Tax Preparer

One of the most valuable outcomes of year-end bookkeeping is reducing stress for both you and your CPA. Your accountant will need: 

  • A reconciled year-end Balance Sheet 
  • A clean Profit & Loss statement 
  • Copies of bank, credit card, and loan statements 
  • Inventory reports (if applicable) 
  • Payroll summaries 
  • Details on fixed assets and depreciation 


The more organized your records, the smoother tax season becomes—and the less you spend on accountants fixing bookkeeping errors. 

Reflect on Your Year and Set Intentions for the Next

Once your books are accurate and complete, take a moment to consider your year from a strategic point of view. 

Ask yourself: 

  • What went well financially? 
  • What challenges did I experience? 
  • Did my budget reflect reality? 
  • How can I improve my financial routines next year? 


This reflection helps you start the new year with clarity. Many of our clients like to pair this with a budget-building session or a QBO clean-up to create a fresh baseline for the year ahead. 

Conclusion: Clarity Begins With Clean Books

Year-end bookkeeping isn’t about perfection—it’s about understanding. Clean, accurate numbers empower you to make intentional decisions, avoid surprises, and feel more confident as you move into a new year. 

At The Bookkeeping Lab, we partner with business owners to make this process simple, supportive, and judgment-free. Whether you want a deep clean, QBO review, or help interpreting your reports, we’re here to guide you every step of the way.