Year-End Starts in November (Not in March)
We're heading into the middle of Q4, and that in and of itself is something everyone needs to be on top of. For a lot of the owners I work with, it's also the busiest stretch of the year. Contractors are trying to close out jobs before the weather turns, trucking is running at peak, and the books get done in whatever time is left over (which, in November, is not much). For others, like creative studios and some professional services, it's the opposite. The big projects have wrapped, things are slowing down, and the books. Feel like something that can comfortably wait until the new year.
Either way, the books tend to slide a little this time of year, usually in small ways. A few receipts don't get matched, a couple of transactions land in uncategorized because you'll sort them out later, and an e-transfer comes in that you meant to ask someone about.
And then something sort of predictable happens. Year end falls on December 31 for every sole proprietor and a lot of corporations, but most owners don't actually deal with it until the spring. (If your year end lands in a different month, everything here still applies, just for the couple of months before yours.)
For most owners, the spring version goes something like this: you get through December, you take a breath in January, and sometime around March, you gather up whatever your accountant needs, send it over, and wait to find out how the year went. And technically that works. The return gets filed. But by then the year is closed, and everything your accountant tells you is a report on something you can't change anymore.
I approach year end a little differently. The useful part of it actually happens now, in November, while there's still time to do something with what the books are showing. So in this post, I want to walk through what I'm doing in client books right now, why it matters more than it looks like it does, and what current books in November make possible that caught up books in April can't.
Here's what I'm actually doing in client books this month.
Right now, I'm looking for clarity on items that may have been sitting in uncategorized expenses for months on end, and I'm following up on questions that have gone unanswered, that kind of thing. Neither of those sounds like much, but they're doing a lot more work than they look like they are.
Start with the uncategorized pile. In QuickBooks (and most other bookkeeping software), anything that couldn't be matched to a category lands in an account called uncategorized expense or uncategorized income, which is basically a holding spot for “we'll figure this out later.” A few items in there is normal. A few months of items in there means your profit number is off, and the tricky part is that no one actually knows in which direction. Some of those transactions are real business expenses that should be lowering your profit. Others might be personal, or a transfer between your own accounts, or a deposit that was never income in the first place. Until the pile is cleared, any answer to “how's the year going?” is kind of a guess.
The unanswered questions are the other half, and they have a shelf life. An e-transfer from August is easy to identify in November because you still remember the job, the client, and probably the conversation about it. In April, it's archaeology. You're scrolling back through texts and old emails trying to figure out who sent you $1,850 and why, and you're doing it at the exact moment your accountant is waiting on you.
What's sitting in the pile looks a little different depending on the business. For a contractor, that might be a supplier account charge that covered materials for two different jobs, so it never got split and assigned to either one. For a trucking owner, it might be a stack of fuel card transactions with no receipts attached. For a creative studio, it's often a few software subscriptions that no one quite remembers signing up for (there's always one). And for a professional services firm, that might be a client reimbursement that landed in. Sales, which makes revenue look higher than it actually was.
Current books are what let you look back to look ahead.
Once the pile is cleared and the questions are answered, the books are current, and this is where November gets really useful. I start looking back to look ahead, not just at obligations but at projections, asking more strategic questions that we can plan and strategize for the months, quarters, and year to come.
Those questions are literally different for every client. What I'd ask a roofing contractor in November has almost nothing to do with what I'd ask a two-person design studio. But the territory they come from stays pretty consistent, and it more or less falls into three areas. The first is what's coming, which covers work that's already booked, the slow season and how long it usually lasts, and any big purchases sitting on the horizon. The second is what's changing, like hiring someone, raising prices, signing a contract, or losing a client who was a big part of this year. And the third is what you actually want next year, whether that's more profit, fewer hours, a raise for yourself, or just a bit more breathing room than this year had.
To make that a little more concrete, here are the kinds of questions that might come up. These are examples, not anyone's actual books.
For a contractor, it might be something like this: How much work is booked for January and February, and is it enough to cover payroll through the slow stretch? If you're thinking about bringing someone on on in the spring, what does the first quarter need to look like to support that? Did the price increase you made over the summer actually show up in your margins, or did the material costs eat it?
For a trucking owner, it might be a question about what fuel cost you per month this year compared with last year, and whether your rates reflect the difference. It might also be whether any of your equipment is going to need replacing in the next year, and what that would mean for cash.
For a creative studio, it might be which clients made up most of this year's revenue and how comfortable you are with that, or it might be whether you'd like to take on fewer projects next year at a higher rate, and what that would actually take.
None of those questions can be answered well from a pile of uncategorized transactions. That’s really the whole connection between the cleanup and the planning. The cleanup matters because it's what makes the planning conversation possible, and on its own, it's mostly just a tidier file. (If you’ve ever wondered if your books are actually working for you or just technically done, I wrote about that difference in How to Tell If Your Books Are Keeping Up With You, or Just Barely Keeping Pace.)
Catching up in the spring costs you more than the cleanup itself.
If your books slide until March, you can absolutely still get them caught up. People do it every year and the return still get filed. The cleanup takes longer and it's more annoying, mostly because of the archeology problem I talked about before, but it's doable.
The bigger cost is less obvious. By the time the books are caught up in the spring, everything they tell you is a report on a year that’s already closed. Yes, your accountant can explain what happened, but there isn't much left that anyone can do about it.
In November, there's still some room to move. You can chase that receivable from September while the client still remembers the job. You can look at a purchase you've been thinking about and decide, with real numbers in front of you, whether it makes more sense this year or next. (I'll have more to say about equipment purchases specifically later this month.) And you can bring your questions to your accountant while they still shape the answer instead of only explaining it after the fact.
There's a practical piece to this too. Accountants are slammed from January on. A November conversation, when they have a little more room to actually think through your situation with you, is a very different conversation from an April one, when they're working through a stack of files with the same deadline as yours.
I want to be clear then I'm not talking about tax strategy here. That's your accountant's job, and they're the right person for those decisions. What I'm talking about is noticing things while there's still time and getting them in front of the right person before the year closes.
Here’s what you can do with your books this month, on your own.
If you do your own books, or you're just not ready to hand them off yet, all of this is doable on your own, and it doesn't need to happen in one sitting either. A couple of hours spread across the month is usually plenty.
Open your uncategorized accounts and work through them. Assign what you can and flag what you can't.
Write down every open question in one place (a note on your phone is fine), and answer whatever you can while it's still fresh.
Reconcile your banking credit card accounts through the end of October.
Pull your year-to-date profit and loss and compare it with the same stretch last year. If you're not sure what you're looking at, Small Business Financial Reports: What Each One Tells You, walks you through it.
Write down three things you already know are coming next quarter, whether that's a slow stretch, a big job, or a deal you know is going to land.
I know that last one sounds almost too simple, but it tends to be the most useful of the five. It gives you, and your accountant, something real to plan around.
You don’t need perfect books by December 31.
I know it's really easy to read a post like this and come away feeling like you're behind. What actually matters is having books that are current enough to have the conversation, so you're making decisions with your numbers instead of finding out about them in April.
And if you're already further behind than that, honestly, that's okay. Starting fresh in January is a real reasonable option, and it's not a failure. A new year is a clean line to draw, and there's nothing wrong with drawing it there.
All of that being said, if you're not sure where you stand right now, the free Financial Clarity Check takes about two minutes and gives you a clearer picture of where things are at.
One of my clients put it better than I could:
Brighten took the guesswork and stress out of my bookkeeping. Katie's guidance has saved me hours of data entry and research, helped me navigate QuickBooks, and kept me ahead of payroll and tax deadlines. I now feel confident everything is accurate and in good hands.
Cyr Becker, Owner, LMNO Contracting Corporation
If you'd like some help getting there, let's talk now about a January or February start. It's fifteen minutes. There's no pressure and no obligation, and you'll leave with a realistic price range either way.
