Preparing annual financial statements and preparing for auditors can be a stressful time for companies and it’s account staff. But it doesn’t have to be stressful There are some preparatory steps most companies can to make the process easier , quicker and more efficient. The important thing is to prepare before year end. For folks with a December year end, now’s the time to start.
It’s useful to do a kind of triage on previous year ends. What are the pain points? Work on those first. Here’s some ways to identify those:
- Your staff can probably identify the things you spend the most time on
- Go through prior year’s audit adjustments and comment letters.
- Has the company started a new business line?
- Has the company started new or different kinds of transactions
- Review new accounting rules. Do you have to account for things differently?
Once you’ve identified the important and time consuming areas, make a plan to address them. Here’s some good practices.
- Assess staffing levels. If you need help, don’t wait until the auditors show up.
- Reconcile all the balance sheet accounts before year end – November period end). Work on the important ones first, but don’t forget the smaller ones. Often problems are hiding in accounts that aren’t regularly reconciled.
- Make sure your reconciliations explain what’s in the accounts. It should not be just a roll-forward of the general ledger.
- Make sure you can do a good variance analysis on income statement accounts. This often includes a comparison of the current year results to the prior years’ results and a budget.
- Clean up AR Aging – make sure problem accounts are identified and included a reserve or written off. Make sure cash and credit memos are applied.
- Make sure all liabilities are recorded. This could include an email (or other communication) to non-accounting folks to remind them to forward vendor invoices to accounting.
- Schedule the audit so you have enough time to complete.
These are just a few of the ideas to make sure your year-end financial statement preparation and audit goes smoothly.