If there’s ever a time your company’s well-kept balance sheet is worth its weight in gold, it’s at year-end. That, of course, is when it’s crunch time to close the books, but the process can go much smoother if you follow some timely procedures throughout the year.
For instance, expenses charged on company credit cards can be tracked better if entered throughout the year.
“You don’t want to dump all those expenses into one bucket of miscellaneous throughout the year,” says Trista Acker, CPA, CFP, senior manager at Rea & Associates. “If you do, you’ll have no idea where you are really spending your money.”
Smart Business spoke with Acker about how to streamline processes when closing the books at year-end.
What are some keys to save time on your year-end financial reporting?
The key to accurate financial statements is your balance sheet. A good suggestion is to get your balance sheet out, work your way down and make sure that you tie all those balances to supporting documentation or calculations and that all those balances make sense.
In addition, bank reconciliations should be done monthly, make sure that your accounts receivable have been reviewed, writing off all bad debts and tie out loan balances to amortization schedules. Another process that could be done throughout the year is to update the depreciation schedule, making sure that new assets are added to the schedule and old ones are deleted. You want to make sure you properly record your gains or losses from sales or purchases.
It can be a real timesaver at year-end if you make the necessary adjustments throughout the year. It is easier to track it as it happens rather than trying to recall what you did months later. There’s also a greater chance of error the longer you wait.
What is one of the more common areas where mistakes can be made?
A company credit card is one area where errors often occur. Individuals may have a company card and may not allocate expenses to the appropriate accounts until the end of the year.
Then they will have to go back through a whole set of credit card statements and try to account for the charges.
But if you keep up with the bills monthly as you sit down to pay them, it will be a huge timesaver at year-end and will give you a clear idea of what’s been happening all year.
You should also look at your payroll. Companies should be reconciling their payroll on the books to their actual payroll registers at least quarterly if not more frequently to ensure gross wages are accurate. You may be able to download your payroll information from a third-party provider right into your software, which will save time and enhance accuracy.
Are there some other suggestions to make the process easier?
Try to distribute some of your tasks throughout the month instead of trying to do everything within 10 days at the end of the month. Spread it out so that you’re taking a look at your receivables on the 20th of the month and taking care of those at that time. Then a few days later you can sit down and do your billing. Another five to 10 days later you can be doing your bank reconciliation.
That way you’re not cramming everything and rushing through. You can be more focused on what you are looking at instead of thinking how to get it done.
What other advice can you give to get the books in the best shape?
Have a checklist for your monthly close. This will help you ensure you haven’t forgotten something as you take care of tasks throughout the month. Set a deadline for completion of monthly closes, to make sure tasks get completed.
If you keep up on your books consistently throughout the year, the year-end should go smoothly and quickly. Don’t hesitate to meet with your CPA or your tax planner before year-end because there is a lot of opportunity for planning or for suggestions to make things go smoother.
Insights Accounting is brought to you by Rea & Associates
