The close of the fiscal year is a critical time for home care agencies. It’s an opportunity to review your finances with a year-end financial checklist to ensure smooth operations and set a good foundation for the year ahead. Overall, year-end financial preparation is the building block to maintaining financial health and gaining insight into your agency’s performance—all of which aid in setting realistic financial goals for the new year.
Streamlining your financial management and strategic planning is key as the year ends. This guide covers essential tasks for home care agencies and highlights how to centralize financial data and automate reporting with ease.
What You Will Learn:
- How to analyze financial statements for better profitability
- Steps to reconcile accounts and manage payables and receivables
- The best practices for payroll and employee benefits assessment
- Tips for effective tax preparation
- Techniques for reviewing and planning your budget
- Strategies for conducting an operational efficiency review
Year-End Financial Checklist
1: Review and Analyze Financial Statements
The first step in your year-end financial review is thoroughly examining your agency’s financial statements. These documents provide valuable insights into your organization’s profitability and financial health.
- Profit and Loss Statement
Start by reviewing your agency’s Profit and Loss (P&L) statement. This document reveals your agency’s revenue versus expenses, providing a clear picture of profitability. Look for trends over the past year to identify areas where your agency may be overspending or where there are opportunities for increased revenue.
- Balance Sheet
Next, examine your agency’s Balance Sheet, which details assets, liabilities, and equity. Ensure that all accounts are correctly accounted for and that your financial position is accurately represented. - Cash Flow Statement
Finally, analyze the Cash Flow Statement to identify trends in cash inflows and outflows. This analysis is vital for understanding your agency’s liquidity and ensuring you have adequate cash reserves to meet operational needs and take on new growth opportunities.
2: Reconcile All Accounts
Reconciliation is a crucial year-end financial checklist process that ensures the accuracy of your records by comparing them with external statements.
- Bank Reconciliation
Perform a bank reconciliation to cross-check your agency’s bank statements with your internal records. This step confirms the accuracy of your financial records and helps identify any discrepancies that need to be addressed.
- Credit Card Reconciliation
Similarly, reconcile your credit card statements, verifying all expenses and ensuring there are no duplicate charges. This process aids in maintaining accurate expense records and controlling costs. - Vendor Account Reconciliation
Resolve any discrepancies with vendor statements through vendor account reconciliation. This ensures that your accounts payable are accurate and that your vendor relationships remain smooth and professional.
3: Review Accounts Receivable and Payable
Effectively managing accounts receivable and payable ensures healthy cash flow. Follow up on outstanding payments to reduce bad debts and clear unpaid bills to balance accounts. Timely payments strengthen vendor relationships and boost credibility.
4: Payroll and Employee Benefits Assessment
Conducting a detailed year-end payroll and benefits assessment is part of maintaining a high standard. Here’s how you can effectively manage this process:
- Review Year-to-Date Payroll
Start with a comprehensive review of your year-to-date payroll. This involves verifying the accuracy of employees’ wages, deductions, and taxes. Pay special attention to any discrepancies that could lead to compliance issues or financial inaccuracies. This process will ensure each entry aligns with your records and can protect your agency from potential audits and penalties.
- End-of-Year Bonuses and Benefits Adjustments
As the year draws to a close, addressing any end-of-year bonuses and benefits adjustments is essential. These incentives should comply with the latest financial regulations and be accurately reflected in your payroll system. Take the time to verify that all bonus payments align with your organization’s employment policies and contractual agreements. Additionally, review any changes in employee benefits, such as health insurance or retirement contributions, ensuring they are up-to-date and properly documented.
- Prepare Tax Documents
One of the most time-sensitive tasks of the year-end process is preparing tax documents and employee-related forms, such as W-2s and 1099s. Ensure these documents are accurate and ready for timely distribution to your employees. Starting this process early can alleviate the year-end rush and guarantee compliance with IRS deadlines.
5: Prepare For Taxes
Speaking of taxes, begin organizing all the financial paperwork you’ll need for tax season. This includes income statements, expense receipts, and any other relevant financial documents specific to your home healthcare business. Having everything in order early reduces the risk of errors and ensures accuracy when filing.
Keep in mind that home care businesses have unique opportunities for tax deductions. Take the time to review what specific deductions you may be eligible for, such as travel expenses for client visits or costs related to medical supplies. Deductions can significantly impact your agency’s tax liability, so don’t overlook this checklist step.
Tip: An accountant who understands the nuances of the home healthcare industry can help you through this. They can discuss possible tax-saving strategies with you and confirm your estimated tax payments.
6: Budget Review and Financial Planning for the New Year
Analyze last year’s budget against actual spending to spot trends and discrepancies, such as unexpected costs or underspending. Use these insights to refine and improve next year’s budget.
From there, forecast for the coming year by setting realistic financial goals that reflect any anticipated growth or changes. This involves setting realistic financial goals that align with strategic growth plans or changes in service delivery. Ensure that your financial plans:
- Reflect anticipated changes in client demand and service offerings
- Include provisions for potential industry shifts or economic conditions
- Support strategic initiatives such as staff training or technology upgrades
Along the way, remember that your budget is not just a static document. It should evolve based on insights gathered from past performance. Be prepared to adapt your financial plans by implementing changes where overspending was identified or where cost-saving opportunities. This is what will help keep your agency’s financial health strong.
7: Conduct an Operational Efficiency Review
Conducting an Operational Efficiency Review is the last step in the year-end financial checklist. During this process, you can uncover significant opportunities for cost savings across your agency and revenue enhancement. The best way to do this involves:
- Expense Evaluation
Start by reviewing your operational expenses to identify potential cost-saving opportunities. Look for areas where costs can be cut without compromising service quality, focusing on streamlining processes and eliminating inefficiencies to enhance profitability.
- Revenue Analysis
Analyze your agency’s top revenue streams and seek opportunities to expand services or optimize pricing. By understanding what drives your revenue, you can focus your efforts on high-impact areas, which maximizes revenue potential and supports growth initiatives.
- Consider Technology Investments
Investing in advanced home care software can significantly improve financial tracking and reduce administrative burdens. With features such as real-time custom reports and prebuilt dashboards, eRSP provides home health agencies with transparent insights into their operations. This empowers your team with data for informed decision-making and strategic planning, ensuring a seamless year-end financial review process.
Conclusion – Start The New Year Off Right
By following this comprehensive year-end financial checklist, your home care agency can set the stage for a financially successful new year. Remember, a thorough review addresses immediate tax and payroll needs and provides strategic insights that drive future growth and sustainability.
In summary, year-end preparation is necessary, and advanced practice management software like eRSP streamlines the reviewing process by centralizing financial data and automating reporting. To experience the benefits of eRSP firsthand, sign up for a demo today and take the first step toward a more organized and financially healthy future.