How to Prepare for Year-End Accounting: An Expert’s Guide

Recognizing the importance of year-end accounting close for maintaining financial health, companies deploy effective approaches and dedicated software to analyze, check, and reconcile transactions. The process is tedious, as accounting teams must focus on the smallest discrepancies distorting the overall picture and submit reports within tight deadlines. However, this stage allows businesses to prepare for the future and eliminate issues hindering growth. In this guide, we will explore its stages and check how a company can prepare for a fiscal year-end.

Closing the Books

The term refers to a procedure that allows entities to verify transaction data and confirm information in ledgers. 75% of ventures spend up to 35 days to finalize the process. Establishing clear guidelines facilitates preparing and checking documentation during the specified accounting period. Business owners can choose any suitable end date to avoid disrupting internal processes and impacting employees’ performance.

Companies increase productivity by following a predictable workflow and adhering to transparent rules. Year-end accounting closing involves reconciliation and reviewing stages. When investigating resource usage, spending, and profits, professionals scrutinize expenses, income, assets, equities, and resources to gain a deeper understanding of the situation and the threats faced by an organization. The primary goal is to produce a well-written statement before an external audit.

Accountants focus on unveiling discrepancies between accounts payable (AP) and accounts receivable (AR). After discovering potential issues, they contact employees and request additional info and supporting documentation to enhance the accuracy of records in the general ledger.

Year-End Accounting Checklist

Simplifying the procedure involves following set guidelines to avoid delays. Seasoned specialists understand the vital role of an annual AP and AR checkup. They focus on such stages to avoid getting sidetracked:

• Creating a closing schedule: Professionals set deadlines to complete reporting and information processing tasks on time. They should prepare the final report before the fiscal close date.
• Collecting pending bills and receipts: Using year-end accounting software with integrated task automation features allows ventures to digitize routines and upload financial documents.
• Verifying balances: Employees must analyze information about the inventory and check whether the listed items and assets are available. Using the year-end closing checklist is necessary to avoid omitting important steps. Reviewing prepaid spending is paramount to understanding the total value of a firm’s assets.
• Matching transactions with information in bank statements, bills, and receipts: Avoiding inaccuracies is critical to becoming audit-ready. When accountants detect a balance outstanding, they should edit the original journal entries.
• Analyzing accrual expenses: It’s imperative to list unpaid bills as liabilities to maintain the accuracy of the company’s financials. Accountants accrue AP and AR to facilitate expense tracking and estimate the available cash amount.

Adhering to these rules streamlines books closing and enables specialists to finalize the procedure without unnecessary delays.

Tax Preparation and Planning

Developing an efficient strategy is pivotal to completing the year-end accounting close within a specified deadline. Businesses should be aware that it takes a lot of time to review and verify all the financial transactions. Preparing error-free expense reports entails close collaboration between the accounting team and individual employees. Efficient tax planning involves such steps:

• Choosing the timeframe to expedite income recognition and record expenses;
• Discovering how to leverage tax deductions to minimize liability;
• Adopting result-yielding strategies to assess unearned income.

Listing tax provisions in the balance sheet is indispensable to understand the amount of short-term liabilities and see what bills should be settled as soon as possible. Proactive planning facilitates stabilizing a company’s position, normalizing the cash flow, and collecting all the necessary tax documents and forms to check their accuracy.

Deploying time-tested year-end bookkeeping approaches allows ventures to improve financial stability, reduce tax risks, avoid paying hefty fines, and maintain compliance with existing laws.

Financial Reporting

Adopting the best year-end accounting practices enables firms to review the metrics they use to estimate their situation. Businesses analyze earnings before tax, consider the cost of products they sell, focus on gross profit and deprecation rate, and calculate net earnings. It simplifies the task of preparing financial statements that meet the requirements imposed by tax authorities.

Embracing efficient methods to achieve consistent cash flow fosters sustainable growth. Establishing cost control mechanisms enables ventures to enhance profitability and scale up operations. Transaction reconciliation at the end of financial year lets organizations detect bookkeeping errors and avoid paying hefty penalties. It minimizes the possibility of making double payments and enables enterprises to strengthen relationships with vendors and other stakeholders.

Closing year-end accounts without any issues empowers organizations to make better decisions in the future. The procedure facilitates financial planning and forecasting. Besides, it allows firms to adopt efficient budgeting practices. The deployment of accounting automation tools and dedicated software to consolidate bills, payroll information, and reimbursements facilitates analyzing a firm’s finances.

Organizations must store specific documents to streamline auditing. The list may include sales records, payroll documentation, information about tax returns, and inventory data. Preparing for annual close and tax filing necessitates keeping tax forms free of inaccuracies, storing profit and loss statements, and double-checking the liability summaries. To avoid misplacing records, ventures must create a backup and store data securely in the cloud.

Preparing for an Audit

Adopting efficient year-end accounting methods helps enterprises to collect evidence before going through an internal or external audit process. It allows managers to make fact-based decisions and meet the requirements set by government regulatory bodies.

Whether a firm needs to go through compliance, operational, or forensic audits, it should understand who will perform it and what financial data they may be interested in. While internal auditors mostly focus on integrated control mechanisms and performance metrics, IRS and bank authorities are more interested in compliance with laws and contractual terms. Forensic audits facilitate investigating potential fund misuse and fraud cases.

Taking these preparatory steps is a prerequisite to achieving better results:

• Analyze the available resources: Tasking experienced accountants with collecting data is the best way to get ready in time. Following the month-end closing procedure streamlines keeping records in order.
• Consider internal processes: Scrutinize routines to discover issues and address them proactively.
• Collect documents: Find journal entries, gather audit trail data, examine policies, and get agreements to have the key information ready by the end of financial year.
• Check reconciliations in all equity statements: Information in account reports and reconciliations should match, as auditors will check it thoroughly.
• Ensure ASC 606 compliance: It enables firms to recognize their revenue, achieve transparency, and foster accountability.

Taking these steps facilitates collecting supporting documents and verifying income sources.

Planning for the Next Fiscal Year

Setting achievable objectives and creating a budget are essential to foster prosperity and growth. Embracing streamlined year-end accounting practices requires monitoring spending patterns, revenue sources, and obstacles hindering development. Getting comprehensive information about the current situation allows a venture to optimize resource allocation, avoid getting into debt, and avoid wasting money.

Organizations with clear goals build a spotless reputation, gain loyalty, achieve prosperity, and embrace a disciplined approach to spending money.

An in-depth analysis helps businesses assess their habits, consider crucial expenses, and obtain the right tools to achieve objectives.

Ventures focus on the following things when making plans:

• Consider mistakes: Reviewing notable achievements and overall profitability is necessary to identify the barriers on the way to growth;
• Set measurable goals: It’s easier to achieve specific objectives. Most businesses focus on revenue increase, expense optimization, and resource management.
• Create a budget: It should list expected revenues and unpaid invoices and categorize them to simplify operations.
• Ensure compliance: Remaining vigilant and tracking changes in legislation facilitates adhering to laws.

Expediting the year-end close procedure is possible using the assistance of experienced specialists knowledgeable about the best ways to organize records.

Conclusion

Organizations of all sizes must thoroughly prepare for internal and external audits to win the trust of their clients and investors, remain compliant, and abide by the laws. Optimizing expenses requires deploying automated bookkeeping software and embracing efficient practices to simplify the transition to the next fiscal period. Nonetheless, performing these tasks is not easy without professional assistance. BooksTime has a team of experts who know everything about efficient year-end accounting practices and help their clients prepare for audits and stay on the good side of regulators. Get in touch with our professional and discover how to organize your documentation and keep corporate ledgers free of any mistakes.