Simple Year End Bookkeeping Checklist for Service Based Businesses

Year-end sneaks up fast. Client work gets busy, deadlines stack up, and your books are usually the last thing to get attention. But with the right process, closing your year can actually feel simple. This service-business bookkeeping checklist walks you through every essential step for a smooth year-end.

What to gather before you start

Firstly, good bookkeeping begins with good preparation. Collecting key documents up front saves time and prevents avoidable errors later.

• Logins for accounting, bank, credit card, payroll, POS, and payment processors
• December bank, credit card, and loan statements
• Vendor W-9s and contractor details
• Fixed asset invoices and major purchase receipts
• Open invoices and open bills
• Deposits collected but not yet earned
• Mileage logs and subscription records

💡Pro tip: Create a single shared folder for the year-end process. Store PDFs and notes inside it, and use short file names with dates so you can search quickly later.

Clean up the day-to-day

Before you close the year, make sure every part of your daily activity is accurate and up to date.

Categorize all transactions.
Uncategorized items lead to messy reports. Clear the entire list. Split mixed charges. Assign classes, locations, projects, or service lines if you use them.

Reconcile every bank and credit card account.
Match each statement to your ledger, clear old items, and remove duplicates. Research anything that doesn’t match. When reconciliations are correct, your cash position is dependable.

Review sales and sales tax.
Confirm taxable versus non-taxable items. Tie collections to your filings. If something looks off, add a note. Your CPA will thank you.

Check for subscription creep.
Review renewals, price increases, and unused tools. Keep what supports your work and cancel what doesn’t. Save all receipts to support deductions and next year’s budgeting.

Service-business revenue checkpoints

Revenue accuracy is critical for service businesses. Slow down here to get it right.

Unbilled work in progress.
Review open projects. Convert approved estimates to invoices. Keep retainers in liability accounts. Align progress invoicing percentages with actual work completed.

Deferred or unearned revenue.
Record client prepayments as liabilities, not revenue. Move amounts to income only when the work is delivered so your financials reflect real activity.

Refunds and credits.
Confirm promised credits. Issue any that are due. Add a brief note for clarity and client trust.

Deposits and prepayments.
Match each bank deposit to an invoice or liability. This prevents overstating revenue. Create a simple workflow and stick to it.

Tie out the balance sheet like a pro

Indeed a clean Balance Sheet is the foundation of strong financials. When it is accurate, your Profit and Loss becomes far more meaningful.

1. Accounts receivable
   Send statements for past-due invoices. Apply payments and credits. Write off uncollectible amounts with documentation. Start the new year with clean expectations.
2. Accounts payable
   Enter all bills and confirm vendor statements. Schedule payments based on cash flow. Avoid duplicate auto-debits. Verify contractor details now so 1099s are correct.
3. Inventory, tools, and supplies
   If you carry supplies, count what you have and adjust to actual. This ensures accurate cost of goods.
4. Fixed assets and depreciation
   List assets purchased this year with taxes and installation costs included. Record disposals. Request updated depreciation so book and tax records stay aligned.
5. Loans, credit lines, and equipment financing
   Reconcile principal balances to lender statements. Split payments into principal and interest. Record fees correctly. Match year-end balances to the amortization schedule.
6. Prepaids, accruals, and deferred revenue
   Amortize prepaid expenses like insurance or software. Accrue expenses that were incurred but not yet billed. Review deferred revenue and move earned portions into income. Accurate timing matters.
7. Owner’s equity
   Record draws, distributions, and contributions. Reclass personal charges to equity so margins reflect business activity only.

Payroll and people tasks

Service businesses rely heavily on people, so payroll accuracy is essential.

Verify employee and contractor details.
Confirm names, addresses, SSNs or EINs, emails, and missing W-9s. Confirm worker classification to minimize compliance risk.

Reconcile payroll totals.
Match annual summaries to your books and confirm that quarterly returns align. Review wages, taxes, benefits, PTO, and bonus accruals. If you offer retirement plans, reconcile provider totals as well.

Prepare year-end forms.
Generate W-2 and W-3 forms for employees. Prepare 1099-NEC or 1099-MISC for contractors. Set reminders for deadlines and save everything in your year-end folder.

Review payroll liabilities.
Match deposits to liability accounts and clear balances so you do not receive notices or penalties.

Tax readiness and CPA handoff

Clean books speed up tax filing and reduce stress for both you and your CPA.

Produce clean financials.
Finalize the Profit and Loss, Balance Sheet, and Statement of Cash Flows. Lock prior periods to protect closed months.

Capture deductions.
Review home office, mileage logs, asset purchases, interest, education, and memberships. Flag anything unusual for your CPA. Clear notes save time.

Close open loops.
Fix negative accounts, clear suspense lines, and recode any remaining uncategorized items. These small adjustments prevent delays during tax prep.

Create a CPA package.
Bundle your financials, trial balance, general ledger, reconciliations, fixed asset schedules, payroll summaries, and year-end forms into one organized package. Add a short summary of any unusual events. This context helps your CPA give better guidance.

Plan the new year for a service business

A solid close sets the tone for a strong year ahead.

Refresh pricing, scope, and capacity.
Review your services. Compare time spent to revenue earned. Adjust pricing or scope where needed. Consider packages or retainers for steadier cash flow.

Set a monthly close checklist.
Create a lighter version of this list and complete it each month. Small, consistent steps prevent overwhelm.

Streamline your chart of accounts.
Merge duplicates. Rename vague lines. Group items in a way that supports better decisions and clearer reporting.

Build a cash flow forecast.
Map out invoices, retainers, payroll, rent, software, and taxes by month. Set a minimum cash level and take action early if you dip below it.

Schedule quarterly check-ins.
Meet with your bookkeeper each quarter to review margins, pipeline, and cash flow. Catch issues early and build healthier habits.

Timeline checklist

Use these dates as a guide and adjust them to your workflow.

• By December 15: collect W-9s, review bonus accruals, and complete a WIP audit
• By December 31: categorize transactions, verify client and contractor data, and finalize supply counts if needed
• First week of January: complete reconciliations, tie out loans, and review fixed assets
• By January 31: deliver W-2s and 1099s

Keep a simple status log. Track what is complete and what is pending. Assign ownership so nothing slips through the cracks.

Common pitfalls to avoid

Even organized business owners miss a few items. Watch for these:

• Recording full loan payments as interest
• Leaving uncleared transactions open for months
• Recognizing deferred revenue too early
• Missing asset capitalization or depreciation
• Missing 1099s due to missing W-9s
• Forgetting to apply credits to invoices
• Leaving suspense or clearing accounts with balances

If an issue appears, document the fix and add it to your monthly checklist so it does not repeat.

Frequently asked questions

Do I need a bookkeeper or a CPA or both?
A bookkeeper manages your daily records. A CPA handles tax strategy and filing. Both together give the best result. If you must choose, begin with strong books and bring in a CPA at tax time.

What if I launched midyear?
Use this same checklist. Start with the month you opened, reconcile forward, and complete the remaining year-end steps.

Which forms apply to contractors?
Most service businesses use Form 1099-NEC for eligible contractors. Confirm thresholds and exceptions, and collect W-9s before paying anyone.

How do I know if a purchase is an asset or an expense?
If the item lasts longer than a year and exceeds your capitalization limit, record it as an asset and depreciate it. Ask your CPA for a recommended limit.

Year-End Bookkeeping Checklist for Service Businesses

Download this checklist during your year-end review. Print it or check it off directly from the PDF.

Final thoughts

Clear books tell the truth about your business. They give you insight, confidence, and the ability to make smarter decisions. With this checklist, you have a straightforward path to close out the year and a simple system you can lean on month after month.

If you want a supportive partner to guide you through it, WalletKeeping is here to help.
Book a free 45-minute bookkeeping checkup and walk away with three personalized recommendations for your service business. Together, we will keep your numbers steady, accurate, and stress free all year long.

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