The 12 Days of Christmas Year-End Prep

Year-end prep is here! And in the spirit of the holiday season, we’re offering a tongue-in-cheek twist on that old favourite, the 12 Days of Christmas.

Sing along with us as we count down the days till year-end prep is done – and pick up some strategies for making this time of year joyful, and not stressful!

On the 1st day of year-end prep, my accountant said to me…
Please add me to your XERO file!

The simplest way to provide your accountant with the year-end data is to just add your accountant as a user in XERO, which we highly recommend as your main accounting software. Your accountant can just log in and get any reports needed. And if you use DEXT to process your expenses, then pdf’s of all the receipts will be attached to all of the bills. How cool is that?!

On the 2nd day of year-end prep, my accountant said to me…
Where are your new asset receipts?

Make sure all of your new assets are showing up on your balance sheet and make sure you have a receipt for each one. Then check to make sure that a pdf of each receipt is attached to the bill in XERO, so your accountant can easily have a look at each one. Save you AND your accountant time!

On the 3rd day of year-end prep, my accountant said to me…
Are your loan balances correct?

Loans and mortgages – they’re a nuisance! For your existing loans, make sure you have a loan schedule or statement from your lender that shows the balance of your loan as of your fiscal year-end. You need to show your accountant that your loan balances are correct! And for any new ones, you need to give them those source documents to show that yes, you did set it up correctly on the balance sheet!

On the 4th day of year-end prep, my accountant said to me…
Did you post last year’s AJE’s?

When a year-end is done and dusted, the bookkeeper needs to record the year-end adjusting journal entries (or AJE’s) so that the Trial Balance (TB) in Xero matches identically with the TB from the accountant. If it doesn’t, the P&L and Balance Sheet reports won’t match the final reports from the accountant. Last year’s TB figures are the starting balances for the current year, and they NEED to match. If they don’t, the accountant will charge you more money to figure out why they don’t match.

If you are still using an older accounting software program like Sage50 and forgot to make last year’s adjustments, chances are it’s too late to make them and the adjustments will need to be made in the current year. What a pain! Your reports will now not be accurate for the current and prior year. Unfortunately, we’ve all been there, done that, at some point! Time to switch to XERO, and get rid of those headaches once and for all. We can help you do that!

On the 5th day of year-end prep, my accountant said to me…

Clearing accounts are used for many reasons when managing the bookkeeping:

  • For tracking tender such as VISA/MC/Debit payments
  • As a temporary place to send a transaction that is being questioned
  • Once it’s figured out, then you can change the account to the correct one
  • As a place to record a transaction that will be reversed
  • Perhaps an e-transfer that was sent but not accepted, so it will be re-deposited into your account

Because life happens, sometimes these accounts get forgotten about and balances start accumulating in them. This happens because a problem was never resolved, or a clearing entry is just never done, or was done, but hit the wrong account!

You need to review these accounts regularly to make sure they are all clearing to “0”. In some cases, there will be a legitimate reason for the account to have a balance, and you will need to explain your reasoning to the accountant if there is a balance on the year-end date. Tender clearing accounts often have balances on the last day of the month, because the MC/Visa/Debit payments were paid by customers, but you don’t receive these funds into your bank until the next day.

On the 6th day of year-end prep, my accountant said to me…
Do you need to write off A/R?

Ah, accounts receivable, always fun. The details of your A/R are not always in XERO. If you have a separate POS system, chances are that is where you will get your A/R details. If you have any “old” A/R amounts that you don’t expect to be paid for soon, you need to tell your accountant about them. Your accountant will probably advise you to “write them off” as a “bad debt” expense. If by some miracle, they do end up paying, not to worry, you can add them back in later.

You will also need to check to make sure that the total A/R on your detailed report matches the A/R on your balance sheet. Sometimes the detailed A/R total is split out on the Balance Sheet between “A/R” (asset) and “Customer Credits” (liability). If this is the case, it’s best to tell your accountant. I have seen accountants make an AJE to adjust the A/R on the Balance Sheet to match the detailed A/R report, when it shouldn’t have, because the “out” was sitting as a Customer Credit. Then things get messy from there on!

On the 7th day of year-end prep, my accountant said to me…
Does your detailed A/P make sense?

Who has a bunch of really old bills on their A/P listing that they know have been paid? I’ve seen this many times. Sometimes a shareholder will pay bills from their personal funds and not tell the bookkeeper, so the bill will just stay there indefinitely until someone questions it. Or sometimes a bill gets entered twice by mistake, one is paid, and the other is just left there to rot.

Have a good look at your detailed A/P listing. Clean it up. Check for duplicates. Figure out what happened and make the adjustments needed. Give your accountant a clean listing of the true A/P amounts. Then, check to make sure the total of the detailed A/P listing matches the value on the Balance Sheet. As with the A/R, the total might be split on the Balance Sheet – in this case, between “A/P” (liability) and “pre-paid” expenses (asset).

If this is the case, explain this to your accountant. If ever these amounts don’t match, and you can’t figure out why, just come clean, and tell your accountant that your records are *&%#@-up, and let them make an adjustment. Your accountant is your friend…they will appreciate your honesty 😊.

On the 8th day of year-end prep, my accountant said to me…
What’s the value of your inventory?

If inventory is part of your business (ie. a retail store of some type), then you need to be doing inventory counts. If you are a smaller operation, you might only do this once per year. Any adjustments for lost, stolen, missing, extra, or damaged goods needs to be reflected on the balance sheet. Your accountant will want to see a detailed inventory listing as of the year-end date. If the total value doesn’t match the value on the Balance Sheet, your accountant will usually make an adjustment to make it match!

But there are lots of reasons why the Balance Sheet won’t match the detailed value. One of them could be because the Inventory on the Balance Sheet builds by adding (debiting) the cost on the bills from your suppliers. When it is sold, a slightly different amount might be used as the cost of goods sold which then reduces (credits) the value in the inventory account. Another possible reason for differences is the timing of adding inventory into XERO and the POS system. Perhaps an item is entered into the POS system on Jan. 10 when the products arrived. But the product bill might be dated Dec. 28, the date used in XERO. So XERO would have a higher balance in the Inventory account on Dec. 31 than the POS system.

Managing and understanding inventory values can be tricky. Make your accountant happy by setting up procedures during the year, so that your inventory figures will make sense at the end of each year!

On the 9th day of year-end prep, my accountant said to me…
How much cash on hand?

Cash, ugh, it’s hard to keep track of sometimes. But you need to do a count at the end of the last day of your fiscal year. Count it all – bills, coin, all of it! Then tell your bookkeeper the total and hopefully, it will jive with the value on the Balance Sheet. If it doesn’t, work with your bookkeeper to figure out why it’s out so that you can make any adjustments needed before you send the final data to your accountant.

Hopefully, these counts are being done and checked against the Balance Sheet regularly during the year, so that you won’t have any unpleasant surprises at the end of the year.

On the 10th day of year-end prep, my accountant said to me…
How much Work in Progress (WIP)?

WIP = Work in Progress. If you are a construction contractor, or perhaps own a vehicle repair shop, you will probably have projects that are “in progress” at the end of your fiscal year. You might have done work on it already, but haven’t billed the customer yet, or perhaps you have received a deposit towards a final bill in the future. Your accountant will want to put a value on the portion of the project that was completed in the current year.

Ask your accountant to advise exactly what they need to know to prepare their WIP calculation and adjusting journal entry (AJE). This will usually be one of those pesky AJE’s that need to be reversed on the 1st day of the new fiscal year.

On the 11th day of year-end prep, my accountant said to me…
Do you have any pre-paids?

Do you pay any of your insurance expenses annually? If you do, your accountant will most likely want to pro-rate the payment, so that only the portion covering the period in the current year is “expensed” in this fiscal year. Perhaps your insurance payment runs July 1-June 30, and your year-end is Dec. 31.

50% of your payment would be expensed in the current year, and 50% would hit the pre-paid expense account (asset). Then on Jan. 1, you will need to record the rest of the expense by moving it out of the pre-paid account. Typically, a company will have certain expenses that they need to do this for year after year. This will be for annual fees such as insurance and memberships.

Your Balance Sheet will have a balance in the pre-paid expenses. You need to be clear on what amounts make up this total. Your accountant might ask you for a list of these amounts, so get that ready now and just give it to them right away. Your accountant will love you.

On the 12th day of year-end prep, my accountant said to me…
Why are your sales lower than last year?

Accountants need to understand the trends in your business. If there are any significant changes in sales or expenses, they need to know why to ensure it is reasonable. You know what’s going on in your business, but just be ready to answer questions like:

  • Why did your sales drop by 50% this year? One of our customers sells books to schools and got this question from their accountant this year. Oh boy, do you really need to ask why? …. COVID! But, to be fair, the accountants probably do need to ask these questions and document the responses, even when the answer seems pretty obvious.
  • Why do you have more non-taxable sales than last year? Maybe you increased your focus this year on selling more grocery items.
  • Why did your total wage expense drop this year in your construction business? Perhaps you had to hire more sub-contractors this year because you were having trouble finding employees

If you can identify these trends this year and point them out to the accountant, that would be ideal! It would reduce the list of questions they will have for you once they complete their review.

Well that’s it – we’ve come to the end of the 12 Days of Year-End Prep!

Hopefully this list will help you prepare, explain a few concepts, and save you some time and money! If you would like help this year or next in getting TRULY PREPPED for year-end, we’re here to help you with that!

Just get in touch here to talk to our team about your bookkeeping needs.

And just for fun, here’s our full 12 Days of Year End Prep:


On the 12th day of year-end prep, my accountant said to me…

Why are your sales lower than last year?
Do you have any pre-paids?
How much Work In Progress (WIP)?
How much cash on hand?
What’s the value of your inventory?
Does your detailed A/P make sense?
Do you need to write off A/R?
Did you post last year’s AJE’s?
Are your loan balances correct?
Where are your new asset receipts?
And please ADD ME to your XERO file….