The end of the year is a hectic time for businesses. Between heavier traffic, sales spikes, and year-end accounting procedures, it’s easy for hiccups to occur in your books.
To ensure the accuracy of your books, it’s important to have a clear plan in place. To do so, you need a comprehensive accounting checklist.
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The year-end close is an accounting procedure that occurs once a year to finalize all transactional activity for the last fiscal period. The process involves re-examining the company’s financial records. It determines which transactions belong in the previous year and which should be recorded in the new one.
It also includes reconciling all accounts and ensuring that all reports are accurate. The year-end close is essential to a business’s success because it allows it to accurately report earnings, assess its finances, and prepare for future investment opportunities.
Several issues can arise during the year-end close that can make it difficult for accounting teams to complete the process. These problems include a lack of documentation, unorganized filing systems, and unclear communication. These issues can cause significant delays in the process. It leads to inaccurate financial statements that may affect the company’s long-term goals.
Many accounting processes are time-consuming. It is important to communicate deadlines clearly and provide employees with enough time to submit required documents. Additionally, it is helpful to set reminders for upcoming tasks to keep everyone on track.
Unexpected regulatory changes can also have an impact on the year-end close. This is because the changes may affect existing accounting processes and controls. Therefore, it is important to assess the impact of these changes on the year-end close before they occur.
There’s a lot of pressure on accounting professionals at year-end. In addition to all the regular tasks that are required of them, there are also many additional duties such as reconciling bank and credit card statements, preparing tax documents, and more.
Here are a few complexities and challenges of year-end closing in the accounting world:
- While employees are essential for the company’s growth and development, keeping tabs on paper receipts and supplier invoices can be an ongoing struggle. These elusive documents can introduce significant bottlenecks when it comes to reconciling expenses and other crucial tasks during periodic closing.
- Managing stacks of paperwork simultaneously is a daunting task, even for the most organized bookkeepers. In the realm of processing complex documents in large quantities, human errors are practically inevitable. Unfortunately, even a simple slip-up in data entry or the misplacement of a document can result in costly repercussions.
- The manual input of data into spreadsheets is not only time-consuming but also susceptible to errors. Surprisingly, this remains one of the most prevalent methods of accounting. Fortunately, the advent of accounting automation software has introduced significantly more accurate and efficient means of capturing and entering data into financial records.
- Year-end closing requires detailed attention to regulatory compliance and financial reporting standards. Ensuring that the company’s financial statements adhere to ever-evolving regulations and accounting principles is a constant struggle, often necessitating thorough audits and reviews.
Creating a year-end accounting checklist and making it available to your team members can help make the process much smoother. The checklist can serve as a reminder for your team to complete the most important tasks in advance of your year-end closing deadlines.
During the year, it’s best to keep on top of key accounting tasks like reconciling bank accounts and checking account postings for errors.
Before the close, it’s a good idea to run an exception report against your general ledger. This can help you avoid significant delays during the year-end accounting close. It prevents costly mistakes that could have a major impact on your financial statements.
To prepare for the fiscal year-end, you’ll need to add up all the transactions in each of your general ledger accounts. In addition, you’ll need to add up all your receivables and payables.
Having a year-end accounting checklist can make the process much easier. In addition, it helps you identify and correct mistakes before they cause serious problems for your business.
Reviewing your current inventory is another crucial step in preparing for year-end accounting. This includes determining which items are obsolete and identifying the total value of these assets for tax deduction purposes.
By reviewing your inventory regularly, you can ensure that you are not overstating the value of your inventory, which could result in overpaying taxes or paying too much for materials you won’t use in the future.
It’s also important to review your petty cash account. This will help you keep track of how much cash your employees are spending and make sure that all receipts and payments have been processed accurately.
If you’re having trouble managing employee expenses, consider investing in a smart spend management software that features digital receipt capture and one-click payments. This will help you and your finance team save time and reduce the amount of paperwork that needs to be submitted manually.
The holiday season is often a busy time for businesses. Balancing busier traffic, increased sales, and payroll duties with end-of-year accounting procedures can be a challenge for some business owners.
Invoices are a critical piece of any accounting system. By ensuring that your cash payments and receipts are managed properly, you will have a clear understanding of how much money is coming in and going out of your company.
It is important to review your accounts payable and receivable before the year ends. This will help you settle any collections and debts before the new year starts. You should also reconcile your bank accounts and credit cards to ensure that the balance listed in your books matches the balance on your statements.
Accounting professionals must carefully review all receipts and invoices before settling up the books. Mistakes here can cause inaccurate reports and inefficient processes, resulting in stressed employees and dissatisfied clients.
To avoid this, consider using software that automatically syncs bank and credit card feeds and sales information from POS systems. This eliminates manual data entry and allows you to keep up-to-date on your business’ finances.
If you have unpaid invoices from consumers, try to reach out to them and offer an instalment plan. This is a polite way to ask for payment, and it can help you close out the year with clean books.
The year-end accounting checklist must include reconciling bank accounts and credit cards. This comparison verifies that the balances listed in your books match those on your statements.
Using separate bank and credit cards is recommended for business purposes since it prevents personal expenses from entering your company records. It’s also simple for you and your bookkeeper to track expenses when you use a dedicated account.
Accounting professionals need to review accounts payable and receivable at year-end to ensure that all invoices have been paid and all debts settled. Missed payments could lead to poor cash flow forecasting and inaccurate financial statements.
Reconciling bank accounts and credit cards is one of the most important procedures during year-end accounting. This is where you compare the spending on your bank account to the spending recorded in your logbooks and ensure the balances match.
Credit card statements typically include an itemized list of purchases, credits, and payments for the billing period. These statements can also include helpful information like the retailer, date, and cost of each transaction.
Ideally, all invoices will be paid, and all debts settled before the new year begins. To help make this happen, accounting professionals need to review accounts payable and receivable for any outstanding amounts due or owed by the business.
A profit & loss statement, or income statement, is all about revenue. It signals whether your business is generating enough profit to survive.
Adding this item to the year-end accounting checklist lets you compare your bank account statement with your accounting records to ensure they match. If not, you’ll need to investigate the discrepancies and find out the source of the difference.
This step also allows you to review your accounts payable and accounts receivable to make sure that all outstanding invoices have been paid or written off as bad debts. You may need to follow up with clients to collect their overdue payments before the end of the year.
The statement of cash flows outlines the total value of your company’s assets. It includes inventory and machinery, and the amount you owe to others through accounts payable or debt. It also shows how this affects your business’s current and future liquidity.
It’s important to reconcile your bank account and credit card statements. So that the balances listed in each match up with those in your accounting records. This helps prevent accidental miscalculations and gives you a clear picture of your financial situation. In addition, it’s helpful to make sure all outstanding invoices have been paid before closing your books. This can be done by reviewing your accounts receivable and contacting any consumers who might still need a polite reminder to pay.