As you approach year-end, it is important to plan ahead to ensure that your financial reporting is accurate and timely, whether it is for internal use only, to an external service provider, or to prepare for an audit or review by your CPA firm. Some areas to consider thinking about are:
♦ Fixed assets – Do you have fixed assets on the books that no longer exist or are no longer in use that should be written off? Take an inventory and compare to your detail list of assets. This may also help to reduce any personal property taxes you are paying. Did all the new acquired assets get recorded into the general ledger in the correct account?
♦ Inventory – Are you planning on a physical count at year-end? It is advisable to clean up the inventory before the count as it can expedite the process and provide you with more accurate results from your counter. If you are having the count observed by your CPA firm, start planning with them early to help keep costs down and improve efficiencies.
♦ Account reconciliations – Start reconciling the balance sheet accounts before year-end to uncover any errors. It will allow for a smoother close at year-end, and it will be more timely. Don't just reconcile your bank accounts but also include accounts receivable, prepaid accounts, accounts payable, long-term debt and equity accounts. Consider whether all your receivables are collectible and should you adjust your allowance account or take some write-offs. Have you added new general ledger accounts that need to be identified to your CPA firm?
♦ Year-end cash flow – Do you have adequate cash available to make owner distributions, employee benefit plan discretionary contributions or payments for year-end employee bonuses? Does your line of credit need to be paid down or be at zero at or before year-end? If you are a cash-basis taxpayer, are you planning to pay all of your outstanding payables before year-end? Are there taxes that will need to be paid at year-end or close to year-end to avoid penalties?
♦ Budgets and cash flow projections – Have you prepared next year's budget and cash flow projections? Are there transactions that need to occur this year or need to wait until next year based on next year's projections?
If your financial reporting is to internal owners and management, it is important to meet well before year-end to understand what their expectations are and if they have any plans for engaging in any unusual or unexpected transactions. This can reduce the stress at year-end for everyone.
If your financial reporting is to external service providers like banks or vendors, communicate earlier rather than later if results for the year are not what they will be expecting. It is better not to surprise but to plan on what will need to be done if results do not meet expectations.
If you are going to have your financial statements audited, reviewed or compiled by your CPA firm, start planning and communicating with them early to best utilize their time and keep your cost to a minimum. Last-minute requests cost more and add more stress to your accounting personnel.