Year-end accounting usually involves chasing down unpaid invoices, looking for missing receipts, and fixing bookkeeping errors before the actual closing process begins. To help lighten the workload, here are some of the best financial practices for successful fiscal year-end accounting.
A closing schedule establishes a timeline of important dates and activities required to finalize financial records for the year. This includes data processing, financial reporting, and reconciling accounts. Consider these steps when preparing a closing schedule:
Each task should be assigned to a specific person or department to prevent financial documents from falling through the cracks. Setting reminders for upcoming deadlines will also help keep everyone on track.
Unpaid invoices can put a dent in your cash flow and year-end financial statements. Contact customers with past due invoices to let them know how much they owe and any penalties or interest charges for late payments. In some cases, it may be worth it to negotiate a payment plan for the outstanding amount to preserve the customer relationship.
If customers don't pay and it's unlikely they ever will, you can write off the invoice as a bad debt. Keep a record of all invoices issued, payments received, and any communication with customers regarding payment. This documentation will serve as evidence in case of disputes.
If you sell or manufacture products, count the inventory on hand. This includes finished goods, products in process, and raw materials. Add up the unit costs and compare the total inventory value to your balance sheets.
If the numbers don't match up, check for shrinkage (waste, theft, loss) or data entry errors. Also, record items that are either obsolete or no longer in sellable condition. Adjust your inventory records to match the actual count, and remember to exclude sales tax from the inventory value.
Compare transaction records with your bank statements to make sure everything lines up. Every cent has to be accounted for accurate year-end financial reports that are audit-ready and compliant with tax regulations.
Review income and expenses in bank accounts, credit cards, petty cash, and loans. Look for any missed or duplicated entries. Additionally, compare the dates, descriptions, and dollar amounts of transactions to reconcile any discrepancies.
If the issue persists, reach out to the bank or credit card company for clarification. They may be able to provide further details about specific financial transactions that are causing discrepancies.
Check amounts received or paid against what has been accrued. Make sure all of the money coming in or going out of the business matches what actually occurred. To close out accounts receivable and accounts payable:
Record any outstanding receivables as credits on the income statement and debits on the balance sheet. Add unpaid debts as liabilities or accrual expenses on the balance sheet.
After getting your books in order, review income statements, cash flow statements, and balance sheets for any dollar amounts that don't seem to make sense. These could be account balances that seem too high or too low, or significant differences in account balances from last year.
Make any necessary adjustments, then analyze the reports to identify trends in financial performance, including revenue streams, operating expenses, and cost of goods sold. These insights will help forecast future profits and allocate resources.
Get a head start on your year-end accounting checklist by reconciling accounts and financial records on a regular basis. This can be done monthly or quarterly to create a clear paper trail for the closing process.
If this schedule isn't feasible for your business finances or resources, consider outsourcing a fractional accountant part-time. They can handle all your accounting tasks and guide you through the year-end closing process to minimize the risk of errors and oversights.
Need help with day-to-day or year-end accounting? Book a free meeting with one of our finance experts to find part-time or project-based accounting professionals.
