November 10, 2020

The first month of the new year is always challenging with the many forms that need completing and the closing out of financial statements. Planning and preparation will provide your organization with peace of mind that you are ready for the financial requirements in 2021. As your organization gears up for 2021, here are practical tips for closing out your year and preparing for the next:


Review your vendor list well before year-end to check that you have all Form W-9s. It is essential to have Form W-9s from all your vendors to ensure the IRS can match their EIN against the payments received. We recommend requesting a Form W-9 throughout the year from new vendors before issuing payment. If a vendor opts not to fill this form out, the payment may be subject to backup withholding.

If applicable, we suggest marking vendors as 1099 vendors in your accounting system. After the December bank reconciliations have been performed, this will allow your accounting team to pull a simple report from the system in preparation of filing Form 1099-MISC, due January 31, 2021. We also recommend glancing through your general ledger for expenses that may be considered vendor expenses and eligible for 1099 reporting. For more information on filing the Form 1099-MISC, see the IRS instructions.

Employees and W-2s

Form W-2s are due to employees and the IRS by January 31, 2021. Remind your employees to verify their legal name and address in your payroll system to ensure accurate 2020 Form W-2s are filed. Gather employer sponsored health coverage amounts for each employee as those will be reported on the Form W-2s in Box 12 with code DD. The Form W-2 instructions provide a layout of where each item should be reported.

Financial Statements

In preparation for completing your year-end financial statements, we recommend a review of general ledger balances and profit-and-loss fluctuations throughout the year. Review your year-end financial statements and prepare any supporting documents needed. We recommend having a supporting schedule for each general ledger account on your balance sheet. These could include a bank reconciliation for cash, a year-end investment statement for investments, or an amortization schedule for loans, to name a few.

Also, as you review your year-end balance sheet, look for items to clean up such as aging payables and receivables. Remember that if you have an aging payable, you’ll want to reach out to the vendor to re-issue a check or move it to unclaimed property if the vendor is not reachable. Perform the same analysis and follow up for aged receivables. Reach out to your customers and discuss payment options, establish a new payments terms, and make a plan collect on the old invoices.


In addition to ensuring you have a budget prepared for the next fiscal year, take this time to also assess your current budgeting tool and whether it is working for your organization. There may be other budgeting tools that prove more useful with minimal investment. We also recommend that, as a part of your year-end analysis, you review your budget to actuals for year-end and note variances that exceed thresholds. Consider how these may affect your next fiscal year. You should also review your historical cash cycle and establish and fund your reserves for the year.


Consider any additional reports or dashboards your board of directors may want to see in the new year. There are many tools, including your own accounting system, that can assist with reporting. Dashboards can tell a story by using key metrics such as gross profit margin, debt-to-equity ratio, and operating cash flow and budget to actual variance reporting. It’s important to get an understanding of what is most important to the user of the financials and to provide an accurate and easy to read report.

Following through on these steps will place your organization in a strong position as you enter 2021. If you have any questions regarding your new year planning, contact a Clark Nuber professional. For a more extensive look into year-end planning for not-for-profits, read our year-end letter.

© Clark Nuber PS, 2020. All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.