The health of a business is not only determined by the generation of profits and the effective management of cash flow, but also its ability to maintain proper financial records at the end of its financial year, this will ensure a seamless transition to the next financial year as well ensuring that the company’s financial statements accurately reflect the financial activities and events for the accounting year.
Preparing for financial year end is the process of reviewing and reconciling accounts, preparing adjusting journal entries and the preparation of financial statements to ‘close the books’ of the company. This short article has been prepared with the purpose of sharing some tips to effectively prepare for financial year end:
The first step towards preparing for year end Is creating a list of tasks to be performed and setting a timeline for when each of the tasks is expected to be completed.
Secondly, all relevant supporting documentation for financial transactions should be gathered and the reconciliation of bank accounts should be performed.
Third, a review of accounts receivables and payables should be done to determine if all outstanding accounts and payments have been accurately recorded. A review of the company’s assets as well as adjusting for depreciation and impairment should also be completed to determine the book value of the company’s assets.
Other adjustments to be done will be dependent on the type of entity such as the valuation of inventory on hand etc, the other crucial step entails gathering all tax documents and calculating deferred tax and income tax implications. Once the entity is satisfied that all these steps have been followed it may then begin with the process of preparing financial statements which at minimum consists of the statement of profit and loss(P/L), the statement of financial position or the balance sheet and the statement of cash flow and the relevant notes to these financial statements as well as outline any changes and adjustments that occurred during the financial year.
To conclude, preparing for financial year end is in essence mandatory to ensure overall compliance, it also ensures that accounts remain up to date and eliminates unnecessary admin and penalties due to late submissions. Preparing for year end affords the entity with the ability to accurately report on the financial health of the entity and allow for the ability to plan and set goals for the upcoming financial year.
In case you are getting stuck in the mix of it all, you’re welcome to contact us at MAS to close those books officially.