At the end of the year, many get into a festive mood and take some time off to relax. However, business owners and those who holds an accounting or finance job role can be quite stressful at this period as they get their year’s finances in order. This is known as the “year-end accounting closing”, a processes to close accounting entries by zeroing out their income and expense accounts and then input net profit (or loss) into the balance sheet.
Adding on to the stress of getting ready for holidays, accountants and business owners may find it difficult to prep and audit their accounts for the year. To avoid this stress, we are sharing these five tips to help you achieve a chaos-free year-end accounting closing.
1. Start Planning Early
Ahead of a year-end accounting closing, one must make hay while the sun shines. Remember: you cannot rush your accounting department to perform a smooth year-end accounting closing at the last minute. No room for error should be allowed during the closing of the books, and thoroughness certainly takes time.
Preparation should be a top priority. Put together an accounting team and stakeholders (if you have a team of people working for you), and make sure they are prepared for the task ahead. This can be done in early December or one month before the end of a fiscal year. If you are going to hire an external party to help your accounting department, November is a good time to do so.
2. Keep Your Accountants Informed
Your accountant should be privy to the financial dealings of your organization. They should have a list of sales made before the end of the year, number of invoices, invoice numbers and dates, and credits and debts. Pending outgoing and incoming year-end invoices must also be considered.
Should there be any record in the book that you do not understand, ensure that your accountant can clarify it before the account-closing period. You do not have to wait until the end of the year for your accountant to gather all the information on processed payments and invoices.
3. Create a Clear Path of Communication with Your Accountant
For a smooth year-end closing, it is important to set your expectations for the process and the outcome. Be sure to communicate clearly on your expectations of preferred format or other in-depth analysis to your accountants. It is difficult to act on a short notice. Hence, it is paramount to prepare adequately beforehand. By communicating with your accountants upfront, you are unlikely to have any important detail left out during your account’s auditing.
4. Use Bookkeeping Software
Automating the accounting closing process is a surefire way to achieve optimal success. By adopting a cloud bookkeeping software, you will have real-time access to your accounts and understand your cashflow situation. This allows you to retrieve vital information at any time, without the need to go through your accountants. This also empowers them to focus on the tasks assigned to them.
Bookkeeping software keeps your business records organized and accurate, so that there is little to no error during the analysis of your account at the end of the year.
5. Review of Employee Data
The review of employee data in your organization is an essential part of your year-end accounting checks. Payroll, benefits and expenses contribute a considerable amount to the overall operating cost (OPEX).
Reviewing employee data will help you prevent problems, such as paying incorrect taxes or other benefits. Such mistakes can negatively impact the organization as a whole. You should work to ensure that such an issue does not appear during the year-end accounting close of your business.
Many often assume that the HR or Payroll department is properly categorizing all the cost and expenses. However, there could still be mistakes in recording employee compensation and benefits. It’s always a good idea to check on the data before the year end rush.
In a Nutshell
Year-end account closing can be a tedious and complicated process. Regardless of your business size, bookkeeping can be a lengthy and dreadful process if you do not adhere to the tips above. Following these tips enables your accounting team to put the right tools and practices in place to make this year’s account closing a breeze. For more information, feel free to get in touch with us.