As the holidays are over, the festive lights are fading, and the accounting industry is going through a different kind of energy- entangled with the year-end closing deadline and chaos.
For accountants, this is not the time of minced pies and mulled wine, but it’s time to deliver everything accurately and efficiently for the entire fiscal year. It would be hard to believe that:
The average accounting staff is estimated to take 25 days to complete an annual close.
The closer of the fiscal year is very crucial period for finance team. Every year, finance professionals bury their heads in the books as they prepare their year-end accounts, statements, and financial reports.
One of the simplest methods to reduce stress and increase productivity during this time is to plan and comply with a regular process. To give you a head start, we’ve outlined all the necessary stages for a successful year-end closing cycle in this post.
What is the Year End Closing?
Year-end closing, also called ”closing the books,” examines balances and confirms that all items and financial transactions from the previous fiscal year tally up in the company ledgers.
This includes figuring out the costs associated with running the business and income, revenue, equity, and other factors.
The aim is to prepare a final financial statement to be kept in the company’s official financial records in case of an external audit.
Challenges with the Year-End Closing: Why the Year-End Closing is So Difficult
Several obstacles are to overcome when preparing for the fiscal year’s finish. During end-of-year closing, accountants frequently rely on others to lighten their hefty workloads. Financial closing is difficult because accounting teams often deal with the following issues during the fiscal year:
Missed Invoices and Receipts:
Employees make purchases for the business to expand, but managing paper invoices and supplier bills is often a hassle. These missing components might seriously impede other processes, such as expense reconciliation when it comes to periodic close.
Compliance and Regulatory Changes:
Tax laws and regulations are subject to regular changes in the dynamic world of finance. It can be difficult to stay current and ensure that the newest standards are followed. During year-end closing, navigating through these changes demands close attention to detail.
Human Errors:
Managing mountains of paperwork simultaneously is difficult for even the most well-organised bookkeeper. Errors are inevitable when humans process vast numbers of complicated texts. Regretfully, even a basic mistake can create a big issue when you balance your books.
Transactions Volume:
Businesses complete a huge number of transactions every year. Every entry—sales, acquisitions, or expenses—must be carefully examined and recorded during the year-end close. Managing such an enormous amount of data can be difficult and time-consuming.
Data Integrity and Accuracy:
Keeping up-to-date financial data all year round is imperative. But as time passes, it becomes harder and harder to guarantee the accuracy of this data. There’s a greater chance of mistakes and inconsistencies; thus, comprehensive data security is necessary.
How to Make the Year-End Closure Easier?
The good news is that planning ahead is a simple and practical way to make end-of-year accounting less stressful and easier for everyone involved. The best approach to save time on closing is to keep on top of financials and spending management throughout the fiscal year.
This guarantees that much of the onerous reconciliation is completed, allowing accountants to focus on examining ledgers, generating financial reports, and establishing budgets and corporate goals for the coming year.
With so much going on, it’s easy to overlook the nuances. We’ve created a complete list of all the critical jobs, so you don’t have to. Streamline your accounting system workflow and get right to the job with this exclusive checklist:
Year-End Closing Checklist for Accountants:
- Prepare a Key Schedule: Determine the key dates and activities each must do. These include deadlines for reporting, data processing, and the fiscal year-end date. Create a calendar with target dates to prevent missing important deadlines.
- Gather Unpaid Invoices and Receipts: To close the books, you’ll need these. Ensure staff members know the requirements and allow enough time for document submission. Be prepared for delays. Employees can quickly upload their paper expense receipts using automation software, including digital receipt capture, expediting the process.
- Compile All Your Transactions: Ensure that the proof from invoices, receipts, bank statements, credit card statements, and other sources matches your transactions. Make sure to account for every penny so your records are audit-ready at year’s end.
- Examine the Payables and Receivables: Verify any unpaid bills and invoices. Accounting function outsourcing can offer specific knowledge for effectively managing accounts payable and receivable.
- Review Assets Accounts: Record adjustment entries and reconcile all cash accounts. Examine prepaid spending and compare inventory records with real stock, if applicable. In this step, the current assets owned by your company are valued.
- Reconcile Bank Statements: Make sure every bank statement is compared, and any differences are quickly resolved. Make contact with accounting outsourcing for professional help with this important assignment.
- Adjust the Grants and Entitlements: Where applicable, account for any grants or entitlements received throughout the fiscal year. These can include government payments, special tax breaks, and private handouts.
- Consult a Professional Outsourcing Firm: Partnering with a professional outsourcing accounting firm can significantly enhance your year-end closing process. These organisations have a dedicated staff of expert accountants who can ensure that essential year-end duties are completed accurately and on schedule. By delegating these tasks to experienced specialists, you benefit from their specialised knowledge and gain the peace of mind to focus on your business goals.
Wrapping Things Up: Get a Head Start on Accounting for Next Year:
If you follow the checklist mentioned above, you will have a stress-free tax year ahead. It’s the ideal time to prepare for the upcoming year as the current one draws close. You can follow the easy guidelines, the lessons learnt, revise rules and procedures, adopt technology, and promote teamwork.
Making a financial plan and preparing your checklist in advance helps ensure a more seamless journey next year. By following these smooth checklists, accountants may guarantee a more accurate and effective year-end closure procedure, laying the foundation for a prosperous beginning to the next fiscal year.
If you still find year-end management challenging, partnering up with Outbooks would be great. Our expertise and technology assistance would navigate year-end complexities, providing peace of mind.