In accounting, financial statements must be closed after a 12-month period of activity, known as the financial year, which generally coincides with the calendar year. The balance sheet, income statement and notes to the accounts are then drawn up to present a true and fair view of the company's accounting situation. The result (profit or loss) is declared to the tax authorities for tax purposes. To ensure that closing the annual accounts is no longer a headache for company directors, it is essential to be well organized beforehand. Here we give you 4 tips to make closing the accounts easier for you, and avoid making it an anxious period at the end of the year.
Drawing up a schedule
Depending on the size of the company, it is sometimes essential for the finance department to issue a closing schedule for distribution to the various departments, with deadlines for the submission of information or the completion of certain tasks.
The involvement of the chartered accountant or statutory auditor in the timetable is important. Their involvement must not be rushed.
Logically, it's best to avoid restructuring one or more departments, introducing a new IT system, or carrying out complex acquisitions, disposals or mergers, for example, in the last few months before the end of the financial year.
Making decisions during the year
A pre-closing is an operation which consists in freezing all accounting movements at a precise point in time, and determining the balance of each account. It enables you to take stock of receivables, debts, amortizations, etc., and to anticipate closing work.
Audits are carried out on an ad hoc basis, to reflect the financial state of the accounts and provide an opportunity to rectify management if necessary.
Depending on your needs in terms of visibility and cash flow, you may decide to close your accounts on a monthly basis. It is also quite possible to plan quarterly or half-yearly closings rather than one large annual closing.
The practice of hard closing (early closure of certain items that will no longer be used in the final months) can be adopted to reduce the workload at the end of the financial year.
Invoices yet to be issued, invoices not yet received, unpaid bills, prepaid expenses and income, and other pending items should be monitored periodically, so that any inconsistencies can be regularized in advance.
In addition to shutdowns, an automated method for extracting sales figures must be put in place.
Working in stages
The key to a successful closing process is the ability to work methodically, step by step.
The actions to be implemented at each year-end are as follows:
- Gather the supporting documents corresponding to each accounting entry. These have been classified by type as they are issued or received.
- Record entries in the daybook. The majority of entries should already be recorded. Monthly, quarterly or half-yearly entries (depending on the company's activity) are recommended.
- Separate accounts payable and receivable. Frequent shutdowns identify disputes, doubtful customers, losses and oversights.
- Take inventory of assets, liabilities and stock.
- Account for depreciation, provisions and amortization.
- Calculate tax.
- Edit all accounting documents.
Use high-performance tools
The best way to avoid becoming overwhelmed at the end of the financial year is to organize yourself optimally throughout the year, using the many resources available to companies.
A pro account and APIs to automate everything from entry of accounting entries to processing of bank statements and systematic integration of purchase and sales invoices into the accounting software avoid human error and save precious time. Another advantage: data is centralized, which means faster access and up-to-date information.
Regular bookkeeping combined with good invoicing management (thanks in particular to supplier invoice dematerialization solutions) and the use of certain software, such as expense management software, simplify year-end closing.