In addition to your day-to-day responsibilities, you should have a monthly and year-end close process to review your accounts, make adjustments, and prepare financial statements. Some things may be quarterly instead of monthly, like reconciling balance sheet accounts and posting depreciation, but have a schedule of what tasks need to be done, who is responsible for them, and the deadlines you expect. At the end of the year, do a more extended review to get prepared for your audit, tax filings, or issuing final financial statements. Important steps to include are:
- Review accounts receivable: Have you billed all your clients? Have all deposits been posted and are all payments recorded correctly against receivables if they are not new revenue? Run an aged accounts receivable report to find any old, unpaid invoices that you need to follow up on. Determine if any invoices are uncollectible and write them off as bad debt. Reconcile your aged accounts receivable report against the balance of the AR account and make sure nothing inappropriate posted to the account.
- Review accounts payable: Have all bills been paid? If any payments come out of your bank account automatically, have they been posted in your accounting system? Run an aged accounts payable report and reconcile it against the balance of your AP account to make sure nothing inappropriate posted to the account.
- Reconcile all bank accounts, credit cards, lines of credit, etc. Follow up on old, uncashed checks to determine if you should reissue any, or void them and write off the underlying expense. Review other old transactions in your accounting system that haven’t been cleared in a bank reconciliation.
- Post depreciation and amortization of fixed assets. Make sure accounts balances in your accounting system match your fixed asset schedule. Confirm if you’ve acquired new assets, put them into service, and need to start depreciating them. If you’re retired, sold, or disposed of an asset, take it off your books and remove it from your depreciation entry. If an asset is fully depreciated but still being used, keep it on your books, but remove it from your depreciation entry.
- Review taxable sales and confirm that you’ve paid all necessary sales tax to state departments of revenue.
- Review prepaid expenses, accrued expenses, and deferred revenue and post any necessary adjustments.
- Prepare and review financial statements. Look into any unusual balances, and if you’re ahead of or behind budget in any areas. Make corrections if necessary. Send financial statements to managers who need to see them.
- Close the month in your accounting system to prevent entries from being posted after the monthly close process is done.
- Start by doing the monthly close for the last month of the year.
- Post or adjust accrued payroll and your liability for unused vacation and paid time off.
- Review revenue and expense accounts to make sure transactions are posted in the correct fiscal year.
- Schedule meetings with your auditor and determine due dates for related work you need to do.
- Prepare any tax filings with the IRS and state government.
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