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C2FO Powers Early Payment Programs for the World’s Largest Companies.
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Nearing the end of your fiscal year? Businesses can benefit from a year-end accounting checklist to navigate the process smoothly.
Having a comprehensive record of these activities is key to understanding your business’s financial health and making growth plans for the year ahead.
It also appeals to shareholders, investors and lenders, which you may rely on to fund and expand your business. Perhaps most importantly, performing accurate year-end accounting can help you maintain good standing with regulators, stay prepared for tax audits and avoid errors that could have legal implications or affect your business relationships.
However, the fiscal year-end is usually a chaotic time for business owners, chief financial officers (CFOs) and accounting managers. Most businesses take over a month to complete annual closing, often juggling month-end and quarter-end duties simultaneously. Finding documents, chasing after buyers for overdue payments and correcting mistakes usually makes the process overwhelming — especially if you’re doing it alone or using manual processes.
The good news is that you can avoid unnecessary headaches with the help of a year-end accounting checklist. Here are five steps to ensure an efficient, accurate and insightful year-end closing.
The first step is to gather all of your financial paperwork. This is a lot easier if you keep files and statements organised throughout the year. Even if you stay on top of this from month to month, however, you’ll most likely still need to track down missing documents. If possible, give your employees a deadline with sufficient notice to submit any necessary records. These will include:
The next task is to make sure that your business’s financial records match your actual financial activities and make adjustments where necessary. This means reconciling your assets, transactions, statements, invoices and receipts.
Closing out your accounts payable will allow you to enter the new year with minimal debt. Making these payments also reflects well on year-end reports and financial metrics. Communicate with any team members responsible for making payments and create an action plan for settling these bills. If you’re unable to pay some, document these expenses as liabilities or accrued expenses on your balance sheet.
Collecting payments on outstanding invoices before the end of the year will strengthen metrics on your cash flow statement. However, settling accounts receivable can be challenging. There’s no guarantee that your buyers will pay, and it takes a significant amount of time and resources to follow up with them.
Many suppliers address this issue by leveraging early payment programmes initiated by their buyers. These programmes give suppliers an opportunity to request early invoice payments in exchange for a discount through an online platform. The faster your invoices are paid, the quicker you can close your accounts receivable, which is valuable if you’re under a year-end time crunch. For most suppliers, this — as well as the boost to cash flow — is usually worth the discount cost. If you’re a supplier for any large enterprises, you might already have access to an early payment programme such as C2FO’s.
“It all works so easily and perfectly that you don’t have to worry about it. As an entrepreneur that is great because you’ve already got enough to do.”
As a small to midsize business owner, CFO or accounting manager, incentivising your buyers with early payment discounts can make the process of settling AR much simpler and more efficient. It’ll also improve your year-end metrics such as days paid outstanding (DPO).
Year-end accounting gives you a valuable opportunity to review your business’s performance over the last year. This enables you to identify challenges, forecast your finances and make realistic plans. How you approach this financial review will depend on your business and industry, but here are some standard metrics to include:
At this stage, your accounts are reconciled, your AP and AR are settled, and you’ve documented the financial year in review. The last step in your year-end accounting process is to set goals for the coming year. Many businesses use the SMART (specific, measurable, attainable, realistic and timely) goals framework when creating annual budgets and financial plans.
If you anticipate a cash flow surplus in the year ahead, your plans might include making investments such as purchasing equipment, expanding the business or launching a new product. Alternatively, an insufficient cash flow might necessitate plans for landing new buyers, implementing more efficient processes or rethinking your approach to buyer payment terms. If you successfully used an early payment programme to help close AR before the fiscal year-end, this strategy could also be factored into your future growth plans.
Closing your books at the end of the year doesn’t have to be overwhelming. A year-end accounting checklist will help you stay prepared and organised, and ensure that you can start the new year with realistic financial goals. If you run into problems settling your accounts receivable before the next fiscal year, consider leveraging solutions such as an early payment programme to expedite the process and optimise your performance metrics.
Learn more about C2FO’s Early Pay solution for suppliers.
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