You would probably find it surprisingly that most of companies are still spending considerable time on collecting, reconciliating, and auditing transactions manually in order to deliver an accurate period-end accounting closing.
By executing the same manual method, companies are facing many time-consumed and error-prone tasks that often lead to errors, which can be very costly and risky for the company.
In this article, CALIXYS gives you all the information you need to perform your period-end accounting closing with a cost-efficient approach.
The period-end accounting closing is a compulsory internal control process that must be carried out at least once a year on the same period. However, French companies can waive this step if they are micro-enterprise or complying with simplified tax regime. We strongly suggest you verify with your local authority since the regulation can vary from country to country.
This process allows accountants and controllers to evaluate the financial health of a company. Leaders of an organization can make informed decision with accurate data and reacted timely to the potential financial risk by performing period-end accounting closing regularly.
Attention – The company cannot start a new accounting period if accountants and controllers do not submit the financial statement and close the book for the previous period.
To prepare period-end accounting closing and, if necessary, amend the company’s report, accountants and controllers need to collect all the transaction records and supporting documents across all your accounts and entities throughout out the entire period.
You will need several essential documents to carry out the period-end accounting closing without violating certain rules and criteria. These documents will allow you to justify your balance sheet, but also to check, complete and correct your results.
Following is the list of necessary documents :
The P&L shows all your revenues, costs, and expenses incurred during a specified accounting period. It can be divided into 3 sub-categories – operating, financial and exceptional.
It evaluates the company’s assets and determine its financial value and sustainability. To prepare the balance sheet you can follow steps below.
– Prepare all the necessary documents that will allow you to modify, complete and justify the balance sheet.
– Evaluate and carry out the accounting inventory work.
– Carry out the auditing work on the accounts.
This will provide details of the profit and loss account and the balance sheet. They contain two types of information: mandatory information and information with significant importance.
It is necessary to understand the process of period-end accounting closing to establish a clear and efficient close. This task involves a considerable amount of time and human resource.
Following is the process to a successful period-end accounting closing.
Une fois que vous avez tous les documents nécessaires, vous devez impérativement justifier l’existence de chaque écriture comptable et contrôler que chaque ligne est bien présente dans votre outil de comptabilité ou dans votre grand livre.
Classez vos différentes écritures comptables de l’année par catégories pour faciliter vos opérations et avoir une meilleure vue d’ensemble.
Il faut également évaluer l’état des stocks, identifier les produits et les charges présentes ainsi que la trésorerie. Vous devez faire attention aux doublons dans vos écritures et éviter les fraudes fiscales et les erreurs de saisie.
This is a review to check the accounting balances before making any changes to the balance sheet. For this purpose, accounts must be checked for the year-end closing.
However, we advise you to review your accounts during the year to make it easier to prepare for the day of the accounting period. But which accounts should be audited?
– Cash accounts: The balances must be reconciled, and it should be compared with your cash statement. Any discrepancies should be justified.
-Receivable and payable accounts: The balances of an account receivable often correspond to unpaid invoices. To avoid the risk of unpaid invoices, delays and errors, the reconciliations between the customer account balance and the G/L account balance must be identical. The same applies to the control of supplier accounts.
-Company and tax accounts :The balances are reconciled with their slips and declarations like VAT, payroll, etc.
The revision of the accounts must be documented for next year’s accounting year and this document also serves to justify the processes in case of problems.
After checking the accounts and entering the accounting entries, the company must amend, complete and justify its balance sheet and profit and loss account, which are, as mentioned above, necessary documents for closing the accounting period.
These documents are important for assessing the financial health of the company and its performance in terms of profit and loss. It is essential to have a tool that will allow you to control your accounting operations and to have a 360° view of the financial health of your company.
People who can carry out the period-end accounting closing are :
He or she can draw up the balance sheet using accounting tools to analyze cash flow, the reliability of data and expenses. However, expertise in accounting is required.
He or she will check the company’s accounts and tax returns.
He or she will record the transactions in the accounts, check the tax returns and prepare the balance sheet manually
What date should you perform the period-end accounting closing?
Generally, the accounting year starts on 1 January and ends on 31 December. However, companies can choose a date to close the book according to their business operation. The condition is that the date must be the same for next period and the accounting year must extend over 12 months.
The period-end accounting closing can be complicated and time-consuming, especially if you have several accounts in different countries and in different currencies need to reconcile. Here are 3 main challenges related to the period-end accounting closing.
Duplicates, unrecorded payments, data entry errors, missing invoices, inaccurate data, calculation errors, incomplete fields – which can lead to potential financial risk to a company but can be solved easily with full automation system.
Accountants, controllers, and all related parties face tremendous pressure throughout the entire process of the period-end accounting closing.
The complex process is expected to complete under a tight timetable yet filled with high number of repetitive tasks. Without surprise, all these elements can be a source of human-made errors.
Almost of software implementation specialists often frown when the compatibility with old disparate data system or outdated legacy system is expected.
It is not easy to find solution that is fully compatible with disparate data system or legacy system and often it will take considerable time to implement the new solutions.
This can be even more complex when a company presence worldwide. However, the problem of inefficiency regarding the period-end accounting closing can be reduced if the question disparate data system is removed.
The CALIXYS’ world-leading solution can help you complete your accounting close faster.
The solution facilitates the process regarding accounting entries and simplifies financial control operations. It allows you to automate all your data ingestion and perform various types of reconciliations on the same interface, which will save you and your time a considerable time and boost the productivity for other priorities.
With the advance algorithm, the solution can ensure the reliability of your data, which help the decision maker react to the potential risk with accurate data and insight.
CALIXYS collaborates with many trustworthy business partners to guarantees the security of our clients’ data. With CALIXYS, you can dramatically decrease the operational risk, avoid fraud timely and fully comply with the regulation. Without heavy installation, our solution adapts to your organization and business requirement.