Prepare your finance team for year-end: A step-by-step guide

What are year-end accounts?

As the year calendar ticks over to year-end, financial processes and accounting can transform into a very stressful area of the business – especially, if the right prep work is not done.

For easy referencing, year-end financials consist of preparing and closing three core documents:

1. The balance sheet – Offers a summary of the business’ current performance, including existing assets, liabilities, and equity.
2. Income statements – This allows you to see at a glance whether your business has been profitable, as the expenses and revenue are itemised, giving you a view of profit or loss.
3. Cash flow statements – Track where money has been directed.

Reconciling hundreds of data points from (often) multiple systems is the main challenge the finance team must overcome. It is only when they achieve a consolidated view that they can create an accurate picture of the current financial state of the business, and therefore help to inform key decision-makers. While this huge task requires an entire year of financial data, it is far easier to manage when your business has accurate month-end financials on hand.

A solution like Access Financials could help you get on top of these month and year-end challenges.

How do you prepare for accounting year-end?

Here’s the handy, step-by-step guide for your finance team:

• Every business is different so create a schedule for year-end accounts processes that suits your business priorities and timings. For example, a manufacturing company will need to finalise stock balances, whereas a professional services firm will need to reconcile multiple projects. Allocate critical tasks across your team and set a timetable for the next steps and completion date.
• Gather all the relevant documentation to analyse the company’s state of affairs for the previous year. This must include income statements, cash flow statements, and the balance sheet. These year-end financials are the basis for your overall assessment and what you submit to the Australian Tax Office (ATO).
• Conduct a forensic check of accounts payable and accounts receivable, this should include looking out for invoices that have already been paid or amounts in accounts receivable that have not been invoiced. It is crucial that you check for errors or missing invoices, make sure everything is in order, and that all outstanding amounts owed are paid before the year ends.
• Summarise cash inflows and outflows for financial activities, such as loans or repayment of loans; operating activities, like operational expenses and revenue; and investing activities that usually consist of assets purchased and sold. This will reveal the nett increase or decrease in business cash-flow during the previous financial year and where the money was spent.
• If you have an inventory, it will be wise to do a complete stock-take as stock is included as one element of your gross profit in the end-of-year profit and loss statement – an aspect that is calculated via deducting cost of goods sold from nett sales. It is important to record this accurately and also account for any stock that remains unsold due to theft, damage, or error.
• Look deeper at the current profit margin, profit-loss statements, and total debt ratio before forecasting cashflow as this will help at the end of the financial year. This will enable you to see seasonal peaks and troughs with additional expenses often being incurred at the beginning of the calendar year. These and other factors make it important to monitor cash-flow meticulously.
• Get full visibility of your year-end accounts as it helps with:
  • Reviewing pricing strategies and implementing any necessary changes for the new financial year. Revisit current pricing methodologies in comparison with competitors to determine whether you are overpricing or under-pricing.
  • Scrutinising financial statements, employee input, and customer feedback. Assess all that against objectives and conclude how well you performed financially and as a company.
• Always re-examine your tax strategies during the year-end as it can help evaluate current tax processes and streamline them for the coming year. This can help your team be more effective through the year and even ready them to meet any regulatory changes that are on the horizon.

You can also refer to our year-end financials checklist to ensure you can tick off each item as you go.

Looking ahead to the new financial year

At year-end, the finance team is focused on last year’s data so they can close the books properly and finalise all statutory accounts. Whilst this is happening, the business will continue to move forward. As such, they must be ready to offer support for core areas such as budgets, forecasts, and quota deployment.

Key considerations include potential numbers of new hires, new infrastructure investments, and support systems scalability.

It is all about looking at the bigger picture too. Revenue growth of 5%, 15%, or even more might be within reach, especially for businesses that are digitalising their operations and expanding into new markets to capture new opportunities.