Year-end is a great time for reflecting back on the year and spending quality time with family and friends. For many of us, year-end marks the end of our company’s fiscal year as well. If we’re fortunate, we even plan ahead for the new year – running a small business is hectic, right?
Ending a fiscal year means doing all that’s necessary to produce accurate financial statements. Our to-do list includes pulling together all the items our accountant is asking for as tax returns are being prepared. Have we taken a physical inventory count? What equipment did we purchase this year? Have all revenue and expense transactions been recorded accurately, and in the right accounting period? The list goes on…and on.
In my experience as a CPA, I have seen how challenging this time of year can be for businesses. Many are left scrambling to provide semi-accurate reports to their accountant. If you are finding the following tasks tedious or even impossible, a robust ERP system may be the best investment your company could make.
- Reconcile Bank Accounts
Account reconciliations is the accountability check that makes sure that our checking balance ties in (reconciles) to the bank’s records. If we failed to record any checks, deposits or automatic payments, our balance won’t tie. If we don’t reconcile our accounts, we may never find the error. As a CPA I remember spending hours fixing or preparing a solid bank reconciliation for clients. A mess here is just no fun, and accounting services aren’t cheap.
Robust reconciliation tools are part of ERP solutions such as Eagle Business Management Software (EBMS) and provide a way to keep accounts balanced and simplify the year-end process. For bonus points with your accountant, you can even prepare a bank reconciliation right at year-end with a date of 12/31.
- Report Accounts Receivable and Customer Down Payments
One accuracy check an accountant will typically perform, is reviewing A/R to a) make sure the Aging Summary ties to the general ledger balance and b) spot odd account balances, such as a customer with a negative balance.
The ability to quickly examine uncollectible accounts and write them off is a must in any robust ERP software. This allows your company to avoid paying unnecessary taxes on invoices you don’t expect to collect on. Reviewing customer down payments while following the strict IRS processes is yet another challenge that is minimized when using proper accounting tools.
- Prepare Inventory Counts, Values, and Adjustments
This is a big one. And for many of us, the single biggest task around the end of the year. Inventory is perhaps also the most critical one, since inventory balance is often our largest asset and cost of goods sold is typically our biggest cost category.
Having solid inventory receiving, tracking and order entry processes are critical to a smooth year-end. Of course, none of this minimizes the importance of a physical count at year-end, or cycle counts throughout the year to confirm that our actual inventory is reflected in the software. EBMS is known for its robust inventory processes and integrates with barcode scanners that make all the difference in tackling year-end inventory.
- Streamline Accounts Payable and Accrued Expenses
Accounts Payable also needs to be reviewed at year end to spot odd balances and old or stale transactions. Most accounting software programs are quite helpful with this. What sets ERP apart is the streamlined accounting for accrued expenses. This includes payroll payable, commissions and other expense items. Having the software configured to manage these items can easily shave hours off at year end, not to mention creating a smooth process for recording these costs throughout the year.
A robust ERP solution is a great way to put technology to work as we deal with the recurring process of wrapping up the year. By keeping our accounting records accurate and up to date throughout the year, we can avoid the unwanted surprises that pop up at tax filing time. I distinctly remember having to bring the bad news to business owners that they owe more in taxes than expected. Not a pleasant situation but one that can be avoided!
If you’re using ERP and the year-end process still seems clunky, an in-depth conversation with your software provider about your pain points may be just what the doctor ordered.
Here’s to wrapping up the year on a good note and starting a new year with eager anticipation for the next visit with your accountant.
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