- Companies should conduct regular financial reviews to save up to 10% of audit fees and prevent costly mistakes.
- Businesses should review expenses, revenue, financial ratios, and cash flow to gain insights into their finances.
- Utilizing reliable financial close software can help streamline processes and provide real-time insights.
- Companies must organize documents and research applicable laws and regulations for audit and tax planning.
- Creating a plan for upcoming taxes allows businesses to make informed decisions about deductions and avoid unnecessary penalties.
Accounting review season is essential for businesses to ensure their financial health and well-being. During this period, companies should take a deep dive into their finances to identify areas of improvement and potential risks. Through this process, they can gain insights into where their money is going, what expenses are necessary, and how they can better manage their cash flow.
Having a thorough accounting review season helps businesses prevent costly mistakes from happening down the road. According to research from the American Institute of CPAs (AICPA), companies that conduct regular financial reviews have fewer errors in their statements than those that do not. Specifically, studies show that organizations save up to 10% on annual audit fees after implementing a review process due to more accurate reporting practices.
However, preparations for the accounting review season will be necessary. Here are a few tips to help you out:
Check All Financial Activities
Checking business financial activities is essential to ensure profits. It allows organizations to identify critical areas of improvement and potential risks and monitor their cash flow. By understanding where their money is going, businesses can make more informed decisions and maximize their returns.
Here are a few key areas to check during the accounting review season:
Expenses
Reviewing all expenses and identifying those necessary for operations or potential savings opportunities is essential. This includes analyzing overhead costs such as rent, utilities, salary levels, and any other recurring payments that can be reduced or eliminated if necessary. Additionally, businesses should look into non-operational expenses, such as travel, entertainment, office supplies, etc., to determine if these are truly necessary for operations.
Revenue
Businesses should also examine their income statements to assess whether they’re generating sufficient revenue or if there’s room for improvement in pricing structures or sales strategies. Companies must also consider the cost of goods sold versus their income to determine gross profit margins.
Financial Ratios
It is also important to analyze various financial ratios such as debt-to-equity ratio and return on assets (ROA) to evaluate the company’s overall financial health and performance over time. These metrics provide insight into how well the company manages its resources and debts and its ability to generate profits from its asset investments.
Cash Flow
Finally, businesses need to examine their cash flow statements regularly to ensure it’s healthy so that they can pay bills on time and manage day-to-day expenses effectively. Companies should track their receivables versus payables by comparing total accounts receivable with real accounts payable each month to get an accurate picture of cash flow liquidity levels and how well they manage customer payments versus supplier bills due.
Utilizing Financial Close Software
The review season will also be more organized with the help of reliable financial close management software. This tool makes it easy to automate and streamline processes such as journal entries, reconciliations, and reports. It also helps ensure accuracy by providing checks and controls that can be customized to fit the needs of each business. Furthermore, the software produces real-time financial insights so companies can see their numbers on demand.
The software will also make it easier to ensure the accuracy of financial statements and reports and eliminate manual errors that could lead to costly mistakes. In addition, the software can provide audit trail documents for better compliance with regulations such as Sarbanes-Oxley (SOX) and Generally Accepted Accounting Principles (GAAP).
Preparing for Auditing and Tax Planning
In addition to the review season, businesses should also prepare for their annual audit and tax planning. This includes organizing financial statements, income tax returns, payroll records, bank reconciliations, accounts receivable/payable ledgers, etc. Additionally, companies should be prepared to answer questions from auditors regarding any discrepancies or issues that may arise during the process.
Finally, businesses will want to create a plan for upcoming tax seasons by researching applicable laws and regulations in advance so they can make informed decisions about deductions and other potential savings opportunities. A clear understanding of the rules allows businesses to plan to avoid unnecessary noncompliance penalties properly.
Final Thoughts
The accounting review season is necessary for businesses to ensure their financial health and well-being. Companies should take the time to check all areas of their finances, use reliable financial close software to automate tasks and prepare for upcoming audits and tax planning. Doing so will help them identify potential risks or savings opportunities and provide them with more accurate reports that can be used as a basis for making better decisions in the future.
