For many businesses, year-end is a very taxing time. Since there are several tasks to be taken care of, such as sending the receivables statement to our clients, bank reconciliations, and tax services calculations both Direct and Indirect, among others, it tends to be the busiest part of the year. Based on the business model, accrual, or cash basis of accounting, we will need to take care of a few year-end tasks. It is advisable to perform these tasks at least quarterly so that the year-end load will be lightened considerably.
In India, the financial year begins on the 1st of April and ends on the 31st of March. So, what forms part of the year-end accounting process. Read on to find out more.
- Completion of invoicing
One of the first steps we do is to make sure that statements are sent to all your customers and remind them of any outstanding payments. It’s advisable to check whether any open Sales Orders or active projects are yet to be billed, and accordingly, send out invoices for them.
Pro-tip – It’s recommended to do this exercise quarterly to avoid hassles during the year-end closing of books of account.
2. To check whether all expenses have been recorded
While maintaining the books of accounts, one very crucial aspect is to verify whether all the expenses, be it vendor bills or other business expenses are properly recorded and in their respective heads to avoid any misclassification.
Pro-tip – The above step is important as it helps us capitalize the right expenses so that we can claim depreciation for the same.
3. Regular follow-up on all outstanding receipts
It is advised that regular reminders are sent to customers who have not paid on time so that your cash flow isn’t negatively affected.
Pro-tip – It is recommended to do this exercise every month so that the outstanding figure will be as low as possible.
4. To write off any overdue invoices
In business, it’s very common to have clients who may default on payments. If this happens, it is suggested to write this off as a bad debt.
Pro-tip – It is recommended to wait for at least 6 months, after the issuance of the bill, to decide whether to consider it as a bad debt or not. A business call can then be made whether to write it off or to wait for some more time.
5. To regularly conduct reconciliation of bank statements
In the accounting and bookkeeping service, it’s advised to do the reconciliation of bank statements as it will help to identify discrepancies, possible bank errors, or fraudulent activity that may have happened in your bank account. It also highlights any uncashed checks that are yet to be cleared.
We have to keep an eye out for cancelled and uncleared checks, as they can create havoc and mess up our receivables or payables accounts during our year-end closing.
Pro-tip – It is firmly advised to conduct a reconciliation of bank statements every month so as to avoid any problems while closing the books of account.
6. A Comprehensive Review of our yearly reports
The Profit and Loss statement tells us how much is our net profit after all expenses. We suggest comparing the current year’s P&L with the previous year’s to see if our business is doing well. Next would be to analyze our Cashflow Report to understand the sources of cash and the application of it, which helps the business to predict future cash flows hence helping the business grow.
It is recommended to engage a credible accounting firm in Mumbai to manage accounting and bookkeeping services for your business. Such a firm would be able to maintain a year-end checklist and make it convenient for you to focus on your business.
