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How to Close Your Books Properly Before Year-End: Early Preparation Tips

  • Post category:Audit

Why Closing Your Books Properly Matters 

If you’re running a business in the Philippines, whether it’s a corporation, partnership, or SME, closing your books properly before year-end is non-negotiable. It’s a critical step in financial management, ensuring that your financial statements are accurate, audit-ready, and compliant with BIR and SEC requirements. 

At UNA Tax and Accounting Services, we help businesses in Pasig and across Metro Manila close their books with less stress and fewer errors through proactive planning and expert guidance. 

Quick Summary: Steps for Smooth Year-End Closing 

Step Common Pitfall What to Do 
Reconcile Monthly Errors pile up if left until year-end Do monthly bank, receivables & payables reconciliations 
Review Invoices/Payables Unpaid or missed transactions Settle payables, record accruals accurately 
Organize Receipts & Contracts Missing documents = disallowed expenses Keep all records (digital or physical) organized 
Verify Withholding Tax Missed EWT = disallowed deduction Check proper withholding, remittance, and documentation 
Post Depreciation & Accruals Understated expenses Record asset depreciation and accrued liabilities 
Draft FS Early Rush leads to errors and delays Prepare trial balances and drafts ahead of deadlines 

Step 1: Reconcile Monthly — Not Just at Year-End 

Many businesses only start reconciling when it’s too late. But monthly reconciliation helps catch errors early and supports smooth external and internal audits. 

Tip from UNA:

Create a monthly checklist for reconciling bank balances, sales reports, and supplier ledgers. This also helps when working with audit firms in Pasig or Metro Manila for year-end engagements.

Step 2: Review Outstanding Invoices and Payables 

Unrecorded transactions or unpaid bills distort your actual financial position. If left unreviewed, you risk misstating income and expenses. 

Tip: 

Check all open accounts receivable and payables before closing your books. Accrue expenses correctly and ensure revenue is properly recorded — this impacts your income tax liability.

Step 3: Organize Your Receipts, Invoices, and Contracts 

Proper documentation is not optional — it’s required. 

According to BIR guidelines, all deductions must be properly substantiated. Without valid documentation, even legitimate business expenses can be disallowed during an audit. 

Tip: 

Organize your digital and physical files. Create folders for: 

  • Official Receipts (ORs) 
  • Sales Invoices 
  • Contracts and Agreements 
  • Payment Vouchers 

UNA’s team can help you digitize and tag these for easy retrieval during audits. 

Step 4: Check Withholding Tax Compliance Before Year-End 

Many businesses lose deductions or face penalties because they failed to apply the correct withholding tax on payments. 

Things to Check: 

  • EWT on rent, professional fees, and suppliers 
  • Fringe Benefits Tax (FBT) on non-salary perks for managers 
  • Filing and remittance of forms like 0619-E, 1601-EQ, and 2307 

Under RR No. 11-2018, expenses are only deductible if the required withholding tax was applied and remitted. Missing this step can disqualify a deduction — even with complete receipts. 

UNA Tip: 

Before year-end, match your payments with BIR 2307s and confirm that all necessary taxes were withheld and filed. 

Step 5: Adjust for Depreciation, Prepaids, and Accruals 

Depreciation and accruals are vital to reflect the true financial standing of your business. Many businesses miss these adjustments, resulting in overstated profits or tax exposure. 

What to Adjust: 

  • Depreciation of equipment, vehicles, and property 
  • Prepaid expenses (insurance, rent, etc.) 
  • Accrued expenses (salaries, utilities, professional fees) 

UNA Tip: 

Our team provides CPA-guided journal entries to ensure these adjustments follow proper accounting standards and are accepted by external auditors and BIR examiners. 

Step 6: Prepare Your Financial Statements in Advance 

Don’t wait until April to finalize your reports. Early drafting helps spot issues early and reduces the stress of tax deadlines. 

Tip:

 Begin preparing your trial balances and draft FS as early as January. This ensures you have time for corrections, management review, and audit preparation. 

Mistake to Avoid: Rushing Year-End Closing 

When closing is rushed: 

  • Receipts get lost 
  • Deadlines are missed 
  • Errors go unchecked 
  • Deductions are disallowed 

UNA’s Solution: 

We help implement a year-round bookkeeping strategy, update your books monthly, and walk you through closing activities — so you’re always ahead of deadlines. 

What UNA Can Do for You 

Problem UNA’s Solution 
Books only updated at year-end Monthly bookkeeping & reconciliation 
Missing receipts or invoices Organized document management 
Confusion with adjustments CPA-guided closing support 
Deadline pressure Compliance calendar & reminders 
Risk of audit penalties Year-end tax compliance review 

Final Takeaways 

  • Closing your books is not just a formality — it’s a compliance requirement under BIR and SEC rules. 
  • Early prep avoids penalties and improves your tax-saving potential. 
  • UNA provides full-year and year-end support to help you meet deadlines confidently and accurately. 

Book Your Guided Year-End Closing Session 

Let us help you: 

  • Reconcile and clean up your books 
  • Validate compliance with withholding tax and other filings 
  • Prepare audit-ready financial statements 
  • Avoid costly year-end mistakes 

Email: sales@una-acctg.com 

About UNA 

UNA Tax and Accounting Services is a division of Nicolasora, Nicolasora & Associates Co., based in Pasig. We offer: 

  • Accounting and bookkeeping services 
  • External and internal audit services 
  • BIR compliance and tax advisory 
  • Business registration and legal services 

Serving clients in Pasig, Metro Manila, and nationwide, we help businesses stay compliant, audit-ready, and stress-free.