Closing The Books

Break out your year end accounting checklist, time to close out the year end accounts. Check every box of your fiscal year end closing procedures. Cross out each line of your accounting closing checklist. It’s a lot of work, but we hope this year end closing checklist helps you with your accounting year end procedures. So you can relax and enjoy the holidays with your to-do list empty!


The Year End Checklist for Closing HOA Accounting Books

The holidays are always a joyful time for everyone. It’s a chance to be with family members. It’s a peaceful break from all the work. But, the onset of the holiday season also marks a crucial period in association accounting: year-end closing.

Businesses must reconcile and close their books at least once a year, as every business owner and accountant knows. What makes community management that much different? To answer that question, you must consider the fact that most Community Association Management companies have more than one community in their portfolio. Closing the books means you must process W-2s and 1099s for every association that you manage and within the same allotted time frame.

Yes, it’s distressing, but it’s a step you must take in running a successful HOA management company. Clark Simson Miller is here to give you a small guide to help alleviate some of your questions and get you through the year-end.


1. Unfinished Business

hand signing document in blue folder | year end closing checklistIf you have anything currently in the queue, you must make these items a priority. Especially so if it involves financial transactions. Things such as bank service charges, reserve fund adjustments, CD interest, interest income, or expense adjustments that took place during the year should be on the top of your list.

Anything that belongs in this current year needs to be finalized before you to try to close the year. Because doing so after that fact, when the year is already past, can be a headache for your management company or community association.

You don’t want to be digging up this year’s records come next year, do you? Make sure you have a handle on the following:

  • Reconciliation of all bank accounts for the previous periods in the prior year
  • Completion of the new budget for the next year
  • Copies of all financial reports (printed or electronic) for the previous year. This is an essential component for auditing, so make this a priority.
  • Backup all of a community association’s data for records.


2. Take Care Of Vendor Stuff: 1099s

  • form 1099 over keyboard | accounting closing checklistCollect all the W-9s you need to create the 1099s you need. If you are paying a vendor upwards of $600, then you may need to have them fill out a W-9 form.
  • Make sure each vendor that you worked with throughout the year has up-to-date information for 1099s. All FINs and SSNs for every unincorporated vendor (i.e. partnerships and sole proprietors) in which your management company or an association you manage paid more than $600.
  • While you are still communicating with the vendors or contractors you worked with throughout the year, you should be collecting up-to-date insurance information and valid policy numbers.
  • Compile a list of vendors that will receive 1099
  • Print a report for each vendor that performed work for any community in your portfolio over the course of the year. This item will serve as evidence for any amounts you report.
  • Print and disperse 1099 forms for community vendors that performed services during the year.
  • If you opt to not file your 1099 forms electronically, you need to generate 1096 transmittal sheets, 1096 is a synopsis page that has to be submitted for each legal entity, giving the IRS information on how many of each 1099 form type that you are submitting.
  • Mail all copies of 1099s and 1096s to the Internal Revenue Service.


3. Payroll Essentials: W-2s and W-3s

  • PAYROLL word on blue binder place on weekly time sheet and payroll summary report | year end accounting checklistWhether you do payroll in-house or have a third party handle your payroll, it’s critical to make sure that all employee information is up-to-date in your system.
  • Produce a final report of the yearly employee ledger for your company’s records.
  • If you handle your payroll in-house or use a software solution, you must update your tax tables before processing payroll for the first time in the new year.
  • Distribute the W-2s to your employees
  • In the event that you decide to not process W-2s electronically, you need to produce W-3 transmittal sheets, the W-3 being the summary page to which the IRS can identify and know how many W-2s you are submitting.
  • Send out all W-3s and W-2s to the IRS.


4. Account Your Inventory

  • If your HOA does some of it’s maintenance in-house, then you must get an accurate count of your materials and supplies.
  • Make sure to include your HOA office and janitorial supplies as well
  • Accounting for inventory at the end of the year helps you oversee spending for supplies


5. Accounting Year Closing of Books

  • If there are any associations that use cost centers you will need to provide a breakdown on the final copy of your ledger for the entire year.
  • If you use in-house accounting software you will have two options to make a decision on old balances. You may decide to zero out old balances and keep fresh books and a clean set of data, or you may decide to preserve that data in the event you want to look at the transaction history in the new year.
  • In your association accounting solution software, there is a short process to follow in order to close the books for the year:
    • End the accounting year, which will equate to the net income becoming equity and the Income and Expense account balances zeroing out.
    • Import or input budgets for the new year
    • If dues or assessments were changed with the new budget, allocate those changes accordingly
    • Update the new accounting periods as required
    • Rollover purge history data from the prior year
  • Close out the year for your payroll if you are using an in-house solution. This will in turn zero out all Year-To-Date balances for employee payroll.


Your Year End Checklist Template

Here’s a simple checklist to make sure you did not miss anything:

  • Gather and organize financial statements
  • Collect past due invoices
  • Collect vendor forms
  • Check employee payroll
  • Account for inventory
  • Organize business receipts
  • Reconcile all bank accounts
  • Close Accounting Books


One Last Year End Checklist Item

How about one last item on your year end checklist? If your association needs help with end-of-year financial reporting or accounting, we can help. Call us for an overview of our services and more information on how we can benefit your community. We’ll be more than happy to help you close out for the holidays every year.