5 Ways to End Fiscal Year 2022 Successfully
The end of February is upon us and that means – for most South African businesses – it’s time to wrap up financial year 2022. We’ve spoken to a variety of financial managers and accountants to bring you the best advice for a smooth financial year-end.
“Fiscal year end is the closing of a company’s accounts for its fiscal year. Simply put, it is just a 12 month or annual accounting period for a company. It is used to assess profits , losses and annual performance of the company’s finances,” says Carina Cilliers, chief financial officer of South African payroll and human resources software company, hellohr.
“Usually in South Africa, FYEs take place at the end of February, which coincides with the South African fiscal year, or at the end of December. Other year-ends are possible, but these are the most common for small businesses,” says Cilliers.
“Preparing for year-end can be a lot of extra work,” adds Cilliers, “but we have some tips to help you prepare for a smooth year-end process.”
Switch to FYE
We asked a number of accountants across South Africa for their top tips for approaching the coming financial year-end. “Don’t leave things late, start asking for everything you need before you avoid a last-minute rush,” says Bakani Ngulani, financial accountant and managing director of BN Business Solutions.
Reiterating what Ngulani says, Lynette Pretorius, professional accountant and tax specialist at Austral Accounting in Durban, says successful FYE does not happen by itself.
“Planning is the key to any system within our companies. So if FYE is a problem, it usually lacks focus and planning – having cash on hand for interim tax payments, having inventory lists prepared that are current and up-to-date, etc., everything will go much more smoothly if it is planned and not seen as this “big event”. Rather, it should be the culmination of the work done over the year, culminating in the closure of cases,” says Pretorius.
“For provisional taxpayers, the ideal is that the amount they owe at the end of the tax year should not come as a surprise to them,” says Willem Haarhoff, co-founder and CEO of the leading company. accounting technology, the DoughGetters group. According to Haarhoff, this is only possible if the necessary figures are constantly updated.
Agreeing with Pretorius, Haarhoff adds, “The accountant and the client must work closely together throughout the year. Both should be proactive and check the numbers regularly, keeping them up to date using cloud technology, such as Xero. »
Below, Cilliers has provided an easy-to-use FYE list for small businesses:
1. Finalize your accounts receivable and creditors
Cilliers advises small businesses to ensure that all their sales to customers before the end of the year have been recorded so that their accounts of income and receivables are accurate. “Make sure that all transactions with creditors have been captured, so that the amount of money due to suppliers at the end of the year is accurate,” adds Cilliers.
2. Reconcile your accounts
“While it may sound like your high school accounting teacher’s mantra, it’s still true that every debit should have a credit. If this does not appear to be the case in your accounts – for example, if your trial balance does not actually balance – you will need to spend time performing reconciliation procedures in order to identify and rectify the error,” explains Cilliers.
Cilliers adds that it’s always a good idea to regularly reconcile at least your main accounts, such as your bank account, customer checking account, and creditor checking account. “If your bank balance according to your accounting software matches the bank statement balance,” she continues, “you have at least some assurance that all transactions that have gone through the bank have been recorded on the books.”
3. Prepare your inventory
Cilliers advises small businesses that trade inventory to make sure they plan an inventory for the last day of your fiscal year. They can decide whether to close the business on count day, count at the start of the day and then count the day’s stock movement or whether they can count after the day’s sales have taken place.
“Make sure stock is packaged in a way that makes counting easier and obsolete products are kept separate so they can be amortized. Make sure your counters are counting in teams of two and know the proper procedure when counting discrepancies are identified,” she says.
4. Update your fixed asset register
Cilliers encourages companies to check the condition of assets on their fixed assets register and confirm that they are still working.
If assets need to be written down or written off, she adds, small business owners should make the entries in the accounting records and update their ledger.
“Update the register with assets sold during the year, as well as new assets purchased. Make sure that the numbers in the fixed assets register match the numbers recorded in the accounting records,” says Cilliers.
5. Write your year-end journals
“When you are satisfied that your accounts have been reconciled and balanced and all transactions for the year have been recorded, it is time to write your closing journals. This could be your amortization journals for the year (or for the last month of the year), creating accruals, closing work in progress accounts, etc. “, explains Cilliers.