Six Questions to Ask About Your Books Before December

There are two times of year to find out what’s really in your books.

One is the middle of November, when there are still six weeks left in the year to do something about what you find. The other is an afternoon in March, when your tax preparer calls with questions about last year and every answer means digging back through old statements.

Most owners find out in March. Nobody asked them to look in November, and from the outside the books looked fine: the bills got paid, payroll went out, and the bank balance was about where it usually is.

But “the bills got paid” and “the books are right” are two different statements. The books are the record your tax return, your banker, and your own decisions are built on. A spring surprise is almost always an old problem that sat in the books all year where nobody was looking.

So this week is six questions to ask about your books before December. You can ask them of your bookkeeper, your controller, or yourself if you keep the books. Each one takes a minute to ask. A couple of them may take an afternoon to answer, and that’s exactly why you ask now.

One word of caution before we start. None of this is tax advice. How any item is treated on your return is a conversation for your tax preparer. These questions are about walking into that conversation with books you trust.

Why November Beats March

I was reviewing a set of books for a retail company, and it was the first year I had looked at them. One number caught my attention. The inventory on the balance sheet had grown, and grown, and kept on growing over the last three years.

Inventory can grow for good reasons in a retail business. This wasn’t one of them. When they sold something, the cost of what they sold was never being expensed as part of the sale. So the cost of every item that went out the door stayed sitting in inventory, year after year, and the number compounded. By the time I saw it, the inventory was extremely overstated.

And nobody had looked at it. The sales got recorded, the bills got paid, and for three years that one line just kept climbing.

The fix was an adjusting entry applied over the three years to bring the inventory back to where it should have been. It was a huge adjustment, and it resulted in tens of thousands of dollars of tax savings that would never have been caught if nobody had paid attention to it.

That’s what an old problem sitting in the books looks like. The number was right there on the balance sheet, every month, for three years. It just needed somebody to ask why it kept going up.

The Six Questions

1. “Are the bank and credit card accounts reconciled through October?”

A reconciliation is the monthly check that the books and the bank statement agree, line by line. Last week it was the report that turned up a check nobody could place. This week it does its everyday job, and every other question on this list gets easier once it’s done. If the last reconciliation was sometime in the summer, start here, and don’t skip the credit cards. That’s where small purchases pile up without anybody coding them.

What you want to hear: “Yes, through October, and here’s the report.”

2. “What’s sitting in the account nobody knew where to put?”

Most bookkeeping software has a holding account, under one name or another, for transactions that came through without a clear home. A few items in there during the month is normal.

A balance that has been growing since spring is different. Every item in it is a decision nobody has made yet. Some will turn out to be income or expenses, and those change the numbers on your profit and loss statement, the P&L. Until they’re coded, the profit you’re reading could be off.

What you want to hear: “It’s empty, or close to it, and here’s what’s left.”

3. “Which of these were mine, not the business’s?”

Think of personal purchases on the business card, money you took out of the business, and money you put in. In an owner-led business these things happen, and there’s a proper way to record each one. The trouble starts when they get mixed in with regular expenses, because then the profit on your P&L isn’t really the business’s profit.

How each item is treated is your tax preparer’s call. Your job before December is to make sure they’re identified and sitting in their own accounts instead of buried in office supplies.

What you want to hear: “They’re separated, and here’s the list.”

4. “Who did we pay this year who will need a 1099, and do we have their W-9?”

If you paid contractors or other non-employees for their services, some of those payments will need a Form 1099-NEC. The IRS instructions put the due date at January 31, both for filing with the IRS and for sending a copy to the person you paid. When that date falls on a weekend, the deadline moves to the next business day. January 31, 2027 is a Sunday, so this time it’s Monday, February 1.

One thing changed this year. For payments made in 2026, the IRS reporting threshold for these forms went up to $2,000, from $600 before, according to the IRS (irs.gov). Which payments count is a question for your tax preparer.

What you can do now is pull the list of contractors and vendors you paid who aren’t on payroll and make sure you have a current W-9 (the form that gives you their tax ID number) from each one who is a U.S. person, meaning a U.S. citizen, resident, or company, wherever they do the work. Anyone who isn’t uses a different IRS form instead, so if you’re not sure which applies to someone, ask your tax preparer. Chasing a W-9 in November is a phone call. Chasing it in the last week of January, with the deadline coming, makes for a very different kind of week.

What you want to hear: “Here’s the list, and we’re still missing two W-9s.”

5. “Will everyone who owes us money pay, and is every bill we owe in the books?”

Your receivables (what customers owe you) and your payables (the bills you owe) are where the books drift furthest from what’s real. An invoice from last spring that nobody has paid still counts as money coming in. A supplier’s bill sitting in somebody’s inbox doesn’t count at all.

Ask for the aging report, which is the list of what’s owed sorted by how old it is, and look hard at anything past 90 days. Some of it needs a phone call this week. Some of it may never come in, and your tax preparer can tell you how anything you decide to write off is handled.

For the bills, ask whether every supplier invoice that has come in is entered, including the ones still sitting in somebody’s inbox. Holding your main suppliers’ statements up against what the books show is the quickest way to catch the ones that aren’t.

What you want to hear: “Here’s the aging, these three need a call, and every bill we’ve received is in.”

6. “Does the inventory on the books match what’s on the shelves?”

If you carry inventory, it’s one of the biggest numbers on your balance sheet and one of the least questioned. The books say what you should have. A count says what you actually have. When the book number keeps climbing faster than your sales, ask why before it compounds the way it did in the story above.

Count it before year-end, or at least count the items that matter most, and compare the count to the books. How any difference is handled on your return is your tax preparer’s call.

What you want to hear: “We counted last month, and here’s how it compares to the books.”

One Meeting, This Month

The six questions fit in one sit-down with whoever keeps your books. Put it on the calendar this month and write the answers down as you go.

Most of the answers will be fine. Anything that isn’t a clean answer gets treated like any other priority in your business: one name next to it and a date it will be done by. If two or three of them come back messy, you asked at the right time of year.

And if you’d like the books to get a look every month instead of once a year, the free Three-Question Monthly Review worksheet is the habit that does it, one sheet after every month-end close:

alinement.com/brief/tools/three-question-monthly-review

One Final Thought

Your tax preparer is going to ask most of these questions anyway. The only choice you get is when. In November there is still time to fix what turns up. In March the year is closed, and all anybody can do is explain it.

You know your business better than anyone. Asking now just means the answers come from you.

I’m curious: of the six, which one would get the slowest answer at your company?

I’d welcome your thoughts.

P.S. Next week: what a fractional CFO looks at first when they walk into a business.

And if you’re an advisor working with owner-led businesses, visit alinement.com/advisors to learn more about the tools and resources we’re building for the advisory community.