Closing the books at the end of the fiscal year is a standard task for any business. For those who are lucky and have a good reporting and budgeting system such as pcFinancials by DSPanel, this task is fairly simple and straightforward.
What closing of the books essentially involves is going through the entire year´s transactions, categorizing these transactions appropriately, adjusting entries, and reviewing all of these to make sure that everything balances out.
It is important to properly and correctly close the books because making the mistake of recording a specific transaction in the wrong year can affect the taxes the company needs to pay and the cash flow management of the company.
Closing books properly ensures that all the financial activities of the company are accounted for, the balances for the next year to be carried out clearly known, and fresh reports for the next year can be built.
Here is a checklist to help you and your business with your year-end close:
- Reconcile Bank Accounts
Make sure that all book balances are equal to year end statements. Double check all the manually entered numbers.
- Review Payroll Expenses
Ensure that the monthly and yearly payroll expenses match. This is especially important in filling out annual IRS Form 940.
- Review Profit and Loss Statements
Review the P&L statements thoroughly making sure that all transactions are categorized appropriately.
- Evaluate Accounts Receivable and Invoices
Check whether or not year end invoices have been sent and look into whether or not all sent invoices have been paid.
- Analyze Fixed Assets and Depreciation Expense
Did the company make a large asset purchase during the year? If so, record them on the balance sheet.
Confirm the current inventory of fixed assets, record of sales, and depreciation as appropriate.
- Run Taxable Sales Report
If your company pays sales tax, make sure to run a taxable sales report.
Doublecheck that correct amounts are inputted so that forecasts for future years will be accurate.
- Fill Out Applicable Employee/Subcontractor Forms
Fill out proper forms for employees or subcontractors to report how much you paid them. This may vary from country to country.
An example of this would be that full time employees use W-2s and 1099s for subcontractors. Check information from country to country for accuracy.
- Look Into Inventory Balance and State Properly
Make sure your inventory is valued properly and note on the balance sheet. Ensure that all of these information are recorded properly to avoid delays and problems later on with the closing.
- Close Out Equity Accounts
To ensure proper statement of financials, certain equity accounts need to be closed out from prior year.
Temporary accounts such as P&L and dividend accounts should be closed to retained earnings or permanent equity account.
- Review Year End Financial Reports
Once all the points in this checklist have been accomplished, carefully review the resulting year end financial reports as this will be used to file taxes or create forecasts.
Software to Help with Closing of the Books for Medium to Large Companies
Performance Canvas by DSPanel is a modern and capable software that streamlines and automates reporting and analysis, budgeting, forecasting, and consolidation. Its functions can be extended to included AR and AP automation, profitability analysis, dashboarding, scorecarding or KPI management.
Using a single platform to help with these accounting tasks makes closing of the books less complicated and more accurate.
DSPanel offers cutting edge technology platform for business analytics, planning, and visualization. DSPanel designs, builds, and operates with the end users in mind. Performance Canvas was created by DSPanel to answer the unarticulated needs of the market not addressed by previous available solutions. With Performance Canvas, information is transformed into valuable business insights for the business executives to utilize in their decision-making process. DSPanel currently has over 2500 organizations deploying their solutions.