Year-end is a process, not a date
The last week of December is the most expensive week of the year for most small business owners — not because of holiday spending, but because of the decisions they did not make in November. By the time the calendar flips, the chance to defer income, accelerate expenses, top up an RRSP, or pay a bonus is gone. This is the year-end checklist we walk every Fluent Books client through, broken into three phases so nothing slips.
Phase 1: Six weeks before year-end (mid-November)
This is the strategic window. Most of the real tax savings live here.
- Run a profit-to-date review. Print a year-to-date profit and loss statement. Compare it to last year and to your budget. Are you having a strong year, a weak year, or roughly flat? The answer changes everything that follows.
- Forecast your tax bill. A rough estimate is fine. If you are a sole proprietor, multiply expected net income by your marginal rate. If you are incorporated, apply the small business rate to active income. Knowing the number now means it does not surprise you in April.
- Plan capital purchases. Equipment, vehicles, computers, and furniture purchased and available for use before December 31 generate CCA deductions for the full year. If you need a new laptop, December is better than January.
- Review owner compensation. Incorporated owners can choose salary, dividends, or a mix. The right answer depends on RRSP room, CPP plans, and family income. Have this conversation now.
- Top up RRSP and TFSA. RRSP contributions for the prior tax year can technically be made until early March, but it is cleaner to handle them before the year closes.
- Look at bonus accruals. Corporations can accrue a bonus in the current year and pay it within 180 days, deducting it now while the personal tax happens later.
Phase 2: The last week of December
- Issue final invoices. Anything you bill before December 31 is income this year. Anything you delay is income next year. Choose deliberately based on your forecast.
- Pay outstanding bills. Cash-basis sole proprietors should pay deductible expenses before December 31. Accrual-basis businesses care less about timing but should still record the liability.
- Take a physical inventory count. If you carry inventory, count it on the last day of business. Adjust your books to match. Inventory variance is one of the most common audit triggers in small business.
- Review accounts receivable. Identify invoices that are clearly uncollectible. Bad debts can be written off in the year they become bad — but you need to make the decision and document it.
- Reconcile every bank and credit card account. Every account, to the dollar. If anything is off, find it now while it is fresh.
- Match merchant deposits. Stripe, Square, Shopify, PayPal — every payout should match a sales record. Missing a $4,000 deposit means understating revenue and overstating profit margin.
Phase 3: January through February (the close)
- Receive and record final statements. Bank, credit card, loan, and merchant statements for December. Wait until they are all in before declaring the books closed.
- Record year-end accruals. Utilities consumed in December but billed in January, payroll earned but not yet paid, interest accrued on loans.
- Reconcile GST/HST and PST. Compare what your books say you collected and paid to what you have remitted. Adjust before filing the final return for the year.
- Process payroll year-end. Final pay run, vacation accruals, taxable benefits posted to the right T4 boxes. Then prepare and file T4, T4A, and T5 slips by the last day of February.
- Generate the year-end financial package. Profit and loss, balance sheet, general ledger, trial balance, AR and AP aging, and a list of major one-off items your accountant will ask about.
- Hand off to your accountant. Do this in February, not April. Accountants are calmer, more thorough, and cheaper in February.
Common questions your accountant will actually ask
- Did you buy or sell any capital assets this year?
- Did you take any shareholder loans or repay any?
- Did anyone you paid get a T4 or T4A — and is everyone classified correctly?
- Are there any related-party transactions (rent paid to yourself, family on payroll)?
- Did you receive any government grants or wage subsidies?
- Did you contribute to or withdraw from an RRSP, TFSA, or RESP?
- Are there any expenses paid personally that need to be reimbursed by the company?
Writing answers to these now, while the year is fresh, saves hours of back-and-forth in March.
BC-specific items that get missed
- PST reconciliation. A separate exercise from GST, with its own rules and remittance schedule.
- WorkSafeBC reporting. Annual employer payroll report is due in early March. Underreporting payroll triggers reassessments and audits.
- Employer Health Tax (EHT). Required for BC employers with annual remuneration above $1.0 million (with a tapered exemption between $500K and $1.5M). Annual return is due March 31.
What a clean year-end actually feels like
A clean close means your accountant gets a tidy package, your tax return goes in early, and you walk into the new year with a real number for last year's profit. It is not glamorous work, but it is the difference between running a business and being run by one.
If you would like the year-end done for you — or want a second set of eyes on the books before they go to your accountant — we offer a flat-fee year-end close for BC small businesses. Book a call and we will scope it together.