Rose Report: Issue 27
Closing Out 2014
As the year draws to an end, it’s time for companies to tie up loose financial ends and prepare to close-out the fiscal year. Annual close-outs usually take place in January, to record and reconcile every last transaction and expense through December 31. The process is not as dramatic as it may sound: from an accounting perspective the year-end close should just be a formal finish to the monthly closing process that has occurred throughout the year, with an increased emphasis on preparing for the annual audit or review as well tax planning. However, it is a crucial part of the year, and a proper closing can benefit the whole company in its business decisions and provide a view of the company’s financial health and year-to-year growth.
Before the year-end close even occurs, the monthly closes should be processed accurately and completed tightly to help prepare for the year-end. Diligent monthly closes provide an accurate picture of the up-to-date financial results which providing information for the company’s leadership to track progress and make smart business decisions throughout the year. Monthly closes begin with the bank reconciliations, cash is king, and by accounting for all cash activity you have the most important step of the close complete. There are number of other procedures involved in a successful close which include among others accruing for revenue and expenses to record activity in the appropriate period and reconciling each of the balance sheet accounts. In addition, monthly closes should be performed with a consistent approach and methodology. A consistent approach provides management and external parties such as banks and investors with confidence in the accuracy of the results. A lack of confidence in the accuracy of the financial statements can be extremely detrimental to growing a business, especially to your relationship with bankers or investors.
The year-end closeout includes several items that are not part of the monthly close, including reconciling payroll expense to payroll tax reports. However, for the most part it is an extension of a sound process utilized throughout the year to generate timely, accurate and meaningful financial information. Accurate financial information arms management with the tools to make critical business decisions, such as when to add staff to enhance growth or when to utilize the line of credit to manage cash effectively to fuel growth. Proper financial management also builds confidence with vendors that are critical to satisfying your customers’ needs.
RFS is focused on providing a solid financial infrastructure that produces meaningful financial information and guidance that is timely and accurate. We build the systems that help our client remain “audit ready all year”. This foundation helps management makes better financial decisions that improves the future success of our clients.