The year-end closing is dramatically addressed by folks in Finance dept as “March end has come” like the famous phrase “winter has come”. It’s a saga of deadlines, reconciliations and reporting to corporate.
The Typical workflow during year end in Finance Dept are:
Timeline Fixation
The First and foremost step of year end closing, from the point of view of an auditee is establishing or setting timeframes for specific tasks or processes.
- There will be a typical intra-dept meeting with also other regional finance managers participating in it, where the person reporting to HOF will be conduct a quick session communicating about deadlines, special requirements communicated by stat auditors, bottlenecks faced during previous year closing.
- He/She will map out key reporting dates and audit schedules required for statutory audits.
- Meeting will also discuss parallel information if any to be made available for indirect tax deadlines, tax audits and cost audits.
- Based on overall timelines/deadline, individuals shall do a reverse work of deadlines for their respective part and plan accordingly.
Set Task priorities:
After the timelines are fixed, task priority has to be fixed using HML analysis. HML analysis categorizes tasks based on their importance, allowing for focused attention on the most critical tasks first.
- High priority- Compliance & Financial Reporting
- Medium priority- Internal Reconciliations & Review
- Low priority- Documentation and back-up/storage of data & papers
Automate Reports :
The importance of Automation of reports in year closure activities cannot be underestimated. Automation of reports significantly reduces manual effort, minimizes errors, accelerates reporting timelines, and frees up finance teams for more valuable analytical and strategic work.
- Finance team should make arrangements in advance to auto-generate standard reports and journal entries that are required for cut off sampling.
- Create checklists of all the activities without bogging down,to avoid missing any routine close activities.
Early bird first!
Within the High priority tasks, find out which are all crucial areas.For example, Reconcile critical accounts (e.g., cash, AR/AP, payroll) first.
For BRS, there would be only handful of bank a/cs and even then bank confirmation can be taken as accurate reflection of balance in most cases. Similarly inter-unit adjustments are within the business and can be sorted later.
But AP and AR involve external party confirmation from whole a lot of vendors and dealers/ wholesalers, which needs advance planning and reconciliation, to ensure audit readiness and avoid last minute delays. Any delays on high priority items could bottleneck other processes.
Arrange for data required from other departments
Communicate deadlines to other departments, from whom additional non-financial information might be required. Schedule reviews with immediate managers to resolve outstanding issues that requires intervention from them.
Wrap up!
Ensure all the items in the checklist have been attended, accounted, fixed or reported and Archive the final copy of records in hard disk to support future audits or tax reviews.