Month and year end procedures often vary depending your pool, spa & hearth business or even your position within the company. I will assume that if you are reading this blog, you have some level of responsibility for accounting activities within the company and subsequently closing out the accounting records. For most of you, that will involve much more than just reconciling the bank accounts.
Here are some basic outlines on what we consider to be month and year end procedures:
At month end, you should:
1. Start with banking
Most all other areas are predicated on making sure all banking transactions are entered and accounted for:
- Check to make sure all cash drawers have been properly closed out.
- Enter ach and electronic transfers from the bank statement or online banking system.
- Reconcile all bank accounts.
2. Credit card accounts
Like banking, this too is predicated on making sure all purchases and or expenses are recorded for the period.
- Enter all credit card charges and credits.
- Reconcile credit card accounts.
3. Complete all other relevant transactional and monthly accounting processes applicable to your business:
- Prepare a commissions report(s).
- Look for open Purchase Orders that can be received, closed or matched to vendor invoices.
- Process warranties (RMAs, RGAs).
- Run an Open Order report and review for transactions that can be invoiced.
- Check for timecards that need approval and record payroll.
- Check for transactions on hold that can be released.
- Recognize job revenue and or close jobs.
- Complete any physical counts underway.
4. Analyze and review balance sheet accounts.
- Review AP trial balance for accuracy
- Review AR Aging report and write off bad debts.
- Update fixed asset schedules and record depreciation and amortization.
- Update any off line worksheets used for reconciliation.
- Record month end journal entries.
5. Close the accounting period
This is to ensure transactions are not posted to the period once you have completed month end procedures.
6. Run reports and perform an initial review
This step often gets overlooked. Often bookkeepers and accounting managers distribute the financial reports without first performing a self-review. This is a crucial step which will save you a great deal in time if you catch discrepancies before they reach the readers. Missed classifications or processes can standout in the reports. Some things to look for:
- Year to year comparisons
- Accounts appearing with opposite balances than what they normally carry.
- Margin discrepancies.
- Net income predictive test. If this is off a lot it’s often a missing expense or revenue item.
7. Run your final reports and distribute.
Many business owners overlook that one of their biggest assets is their accounting historical record, as defined by financial statements prepared both internally and externally (CPA prepared).
Here are some report examples. The report names in bold should be mandatory each month:
- Balance Sheet (Comparative)
- Income Statement (month and year to date)
- Income Statement (month (current year) month (prior year)
- Income Statement (Year to date) and (Year to date prior year)
- Trial Balance
- General ledger (month only)
- AR Aging
- AP Aging
- Inventory Valuation (Summary)
- Customer Deposit Report
- Sales Tax Due report
At year end, you’re doing the same steps as month end, or, maybe some of the month end you reserve for year end. I’ll assume you have done all of the month end steps up to this point. Now you have a few additional steps:
- Full Physical Inventory count
- Owner and officer special calculations
- Look for and consider voiding checks not cleared past XX months
- Year-end payroll processing
- Prepare Vendor 1099’s
- Update fixed assets for disposed or retired assets. Often we record the new ones, but forget to remove the old ones.
- Record tax accruals and or other accruals reserved for year end.
- Record accountant or CPA adjustments.
- Run a complete report archive for the year; paper, electronic or both.
It is becoming more and more economical and secure to store company data in the cloud. Consider using Microsoft Onedrive or Google Drive to archive financial reports that are used by owners and key stakeholders. You can easily share those locations and they are accessible from multiple devices.
While this certainly is not a complete list, it is a good start and I hope you find it useful.
- Kimberly Marcy