In this article, we offer a few tips to help you prepare your annual financial statements quickly and reliably.
- The ‘actors’
It's a common misconception that the year-end closing is a matter for the accounting or finance departments. This is a mistake! In reality, the accounting department is fed by the various departments upstream, with their own tools.
So the whole company is concerned, whatever its size. Failure to take this into account means that the final link in the chain has to ‘run around’ trying to retrieve the necessary information. The involvement of General Management is therefore essential, to make the whole company aware of the stakes involved.
- Best practices for closing accounts
- Analyze accounts on an ongoing basis
Throughout the year, it's important to carry out the analyses, controls and accounting inventories that make year-end work almost trivial, and which mean that the results are already known, with the year-end only confirming the previous estimates.
At most, there is a little more tension due to the short deadlines and the involvement of the statutory auditors (where applicable). Of course, this rigorous accounting organization is underpinned by comprehensive, detailed monthly reporting.
- Closing schedule
The aim is to formally identify, by process, the information suppliers, to explain to them the data required for accounting purposes, the possible format and mode of transmission, and to list any possible difficulties.
The various operational departments will frequently find solutions that had not been envisaged by the accounting department. Once the inventory has been taken, the next step is to draw up a schedule, the details of which will depend on the organization's level of performance.
Every closing is an opportunity to improve it.
The closing schedule must represent a genuine commitment to deadlines and quality of information for the whole company.
A preparatory meeting is often useful to bring together the key players. It should result in each manager taking ownership of his or her part of the annual closing of the company's accounts.
- Formalizing the work: compiling a closing file
Properly kept accounts must be easy to audit. Documents drawn up at the end of the financial year are systematically examined by a number of people, in particular the Statutory Auditors.
It is in everyone's interest that year-end closings are supported by a set of files that give a clear and immediate picture of the regularity and consistency of the accounts. These closing files should be standardized. The time spent putting them together will save you a lot of time later on.
The closing file can be set up according to a standard model, including the justification of the main balance sheet and income statement items. It ensures traceability of the options taken in accounting for transactions and estimates, and makes it easy to locate supporting documents.
The closing file can be outsourced, for greater reliability.
Entrust us with the complete processing of your accounting operations.
- How to reduce closing times
In order to optimize the closing process, we have summarized a few ideas below:
- Offset bylaws and bylaw agreements This involves closing operations on a date close to the balance sheet date. For example, stop sales on the 29th or 30th and book subsequent sales in the following period (taking materiality into account).
- Use estimates certain income or expenses can be recognized if the estimate is well documented and validated.
- A good system and optimize it to facilitate reconciliation and limit manual processing.
- Automate daily and closing accounting entries (subscriptions, invoices receivable...)
- Make the accounting database as unique as possible to avoid time-consuming reconciliations between multiple sources of information,
- Annual pre-closing : With a view to reducing the time needed to produce and communicate financial information, a pre-closing exercise, often carried out one or even two months before the closing date, proves to be both effective and useful. In order to meet the dual objective of improving performance, speeding up closings and ensuring the reliability of financial information, a pre-closing exercise must be part of a structured approach, requiring adequate planning in order to :
- include this first phase as an integral part of the closing schedule,
- define the nature and scope of the work specific to it,
- determine the links and transition between this work and that relating to the closing.
One thing is certain: reducing closing times in no way means reducing accounting quality. Quite the contrary, in fact!
To conclude, the key to a successful closing of accounts is the’ANTICIPATION.
