As the end of another year quickly approaches, many companies scramble to get their accounting records in shape for their service providers. Here are a few helpful tips for finalizing your books and records:
- Leave your books and records open as long as possible. By leaving these open longer, you will capture additional subsequent activity and accruals pertaining to 2021, making your trial balance and general ledger more accurate.
- Ensure your company has implemented the prior year service provider recommendations and verify that your trial balance incorporates the prior year journal entries from your accounting professional, as applicable.
- Review your bank reconciliations for old, uncleared checks and write them off or re-issue them if need be. Having old, uncleared checks on your bank reconciliation hinders the ability to reflect an accurate cash balance at year-end. Revert to your company’s policy for the amount of time needed to pass before writing off stale checks. If your company does not have a current policy, now is a good time to start one. NOTE: Beware of escheat rules in your state. Unclaimed employee or vendor checks may have to be reverted to the state. Annual information filings can also be required and are often missed.
- Review your accounts receivable and accounts payable schedules in search of stale items and write these off as necessary. Revert to your company’s policy for the amount of time needed to pass before writing these off. If your company does not have a current policy, implementing a formal collection policy for accounts receivable will improve cash flow and reduce the number of delinquent customers.
- If you received a Paycheck Protection Program loan from the U.S. Small Business Administration, and if it was forgiven during 2021, ensure that the loan is recorded as income in the period in which it was forgiven. Make sure your accounting professional can easily identify the amount in income (i.e., do not lump with other miscellaneous income) to ensure proper reporting as non-taxable for tax purposes.
- Review your fixed asset listing to ensure accurate representation for all assets that are still in use, dispose of old assets on your books that are no longer in use, and review your repairs and maintenance expenses in search of items that should be capitalized. If your company does not have a formal written capitalization policy, now is a good time to implement one.
- Assess intangible assets for impairment and adjust as necessary.
- Ensure that transactions that affect multiple accounts are properly allocated, such as loans and interest expense, payroll and payroll taxes, etc.
- Review recently released Financial Account Standards Board (“FASB”) Accounting Standards Updates (“ASUs”) that apply to your company and ensure they are being correctly implemented, including the long-awaited lease accounting standards, which go into effect in 2022 for privately held companies.
In addition, be forward thinking. For agreements that will expire within the next several months, start renegotiation discussions early with service providers and/or tenants. Also, as cybersecurity concerns become increasingly important, now is the time to evaluate and mitigate these risks to your company. Lastly, assess the software you utilize and ensure that it provides the reporting that you need to make management decisions.
Most importantly, reach out to your accounting professionals early, ensuring that deadlines for financial reporting and tax filings are met.