Preparing For Year-End, Part 1: Take Steps Now To Minimize Year-End Headaches

By Thomas G. Stephens, Jr., CPA, CITP

With the onset of cooler air and brightly-colored leaves, accountants everywhere are looking forward to the holiday season. While taking some time off from work and re-connecting with friends and family are certainly favorable aspects of this time of year, there is a downside – year-end is just around the corner! And with year-end, we find ourselves trying to manage closeout processes, prepare payroll, income, information tax returns, all while coping with auditors and managing our normal daily activities. In this two-part series, we will examine steps accountants can take NOW to reduce some of the headaches and frustrations normally associated with year-end. Part I focuses on steps that can be taken by accountants working outside the public accounting space and Part II focuses on steps that can be taken by accountants in public practice.

Year-End Steps For Accountants In Industry, Governmental, And Not-For-Profit Organizations

The following is a checklist of steps that accountants working in industry, governmental, and not-for-profit organizations should consider taking before December 31 in order to minimize year-end headaches and hassles.

Confirm your relationship with your external accountant. Now is the right time to confirm your expectations of your public accountant and ensure that both of you understand each party’s responsibilities. Don’t wait until something “slips through the cracks” to discuss who should have been responsible; rather, address these issues now to ensure a smooth year-end and tax filing process.

Examine the user IDs and log-ons to your applications and remove or disable any for terminated employees. During the course of the year, it is quite likely that your company experienced some employee turnover. Be sure that the user IDs and other log-on information for terminated employees have been removed or disabled, as appropriate, in order to minimize the risk of unauthorized access to your information systems.

Ensure you have an adequate supply of current-year forms such as W-2s or 1099s. If your company will be printing tax forms such as W-2s and 1099s, be sure you have an adequate supply of blank forms on hand. Otherwise, you’ll find yourself in a mad scramble for forms on January 31.

Verify addresses and taxpayer identification numbers for vendors who will receive Forms 1099. Smaller companies in particular often do not collect critical data for Forms 1099 prior to paying vendors. Now is an excellent time to send confirmation letters to vendors asking for a positive confirmation of critical data such as addresses and taxpayer identification numbers.

Reconcile detailed balances in Accounts Receivable and Accounts Payable back to general ledger control totals. In some accounting applications, it is possible to generate transactions that impact Accounts Receivable or Accounts Payable balances in the general ledger, without impacting the detail in the sub-ledger. Now is an excellent time to reconcile the detailed transactions to the general ledger to ensure there is adequate support for all balances in the general ledger.

Prepare amortization schedules for any new loans or capital leases. For any new loans or capital leases, prepare the appropriate amortization schedule. You may also want to begin adjusting principal and interest balances to the appropriate amounts per the amortization schedules.

Review bank reconciliations for outstanding checks that may need to be voided or placed into escheat. Depending on state laws, checks that have been outstanding for an extended period of time may need to be voided or placed into escheat.

 

Update your software. Now is an excellent time to update your accounting software and update it if you’re not currently using the latest revision/version. Consider if now is the right time to upgrade to Microsoft’s Vista operating system or Office 2007.

If you’re undergoing a financial statement audit, consider more streamlined approaches to the confirmation process. Discuss with your auditor some of the new electronic tools such as Confirm by Capital Confirmation and to see how much time and effort you both could save in the bank account confirmation process.

Plan now for year-end inventory counts. Begin organizing warehouses, re-stocking returned merchandise, and organizing count teams to ensure the most efficient inventory count process.

While it is very easy to get caught up in the non-business activities associated with this time of year, taking a few easy steps now can pay significant dividends downstream. Simple activities such as getting organized for year-end, updating user IDs and software, reviewing outstanding checks, and confirming your relationship with your accountant are smart, effective ways of approaching year-end.

Next month’s article will focus on steps that accountants in public practice can take to make year-end flow more smoothly for both them and their clients.

Mr. Stephens is a shareholder in K2 Enterprises, where he develops and presents technology-related continuing professional education programs to accounting and finance professionals across the United States. You may reach him at tommy@k2e.com.

 

The views and opinions expressed in this column are those of the author and do not necessarily reflect the opinions of Microsoft.