Accounting isn’t everyone’s cup of tea. If terms like accounts receivable, accounts payable, and deferred revenue make your eyelids go droopy, then this post is not for you. However, if finances and accounting are part of your job, you will want to read on!
The fiscal year is very important for your company’s accounting purposes and for preparing financial statements. Simply stated, it is a one-year period that companies use for financial reporting and budgeting.
Commonly, a fiscal year corresponds with the calendar year – beginning on January 1st and ending on December 31st. If your company’s fiscal year does not align with the calendar year, that’s ok. In fact, Successware allows customers to use any month as the start of their fiscal year. Our system even allows customers to use a “4-4-5” accounting system with 13 fiscal periods if they so choose.
Obviously, you need good records (such as income statements and balance sheets) to prepare accurate financial statements. Good recordkeeping helps you monitor the progress of your business, prepare financial statements, identify sources of income and areas for growth, keep track of deductible expenses, and prepare tax returns.
On the other hand, poor record keeping could lead to dire consequences for your company. Your business could end up paying extra taxes, face an IRS audit, receive criminal penalties for improper licensure, and so on.
Keeping accurate records puts your company in a position to succeed and grow. Furthermore, closing each fiscal period and fiscal year accurately is important to your overall recordkeeping. Successware makes this process easier.
Closing a fiscal period prevents any further accounting transactions from being made within that period’s specified time frame. In preparing to close your fiscal period, you’ll want to step through our “period end checklist” and ensure that the following items are entered, closed, and/or reconciled as appropriate: Jobs/Invoices; Accounts Receivable; Accounts Payable; Payroll; Account Register (e.g. undeposited receipts, petty cash, bank and credit card accounts); Inventory; and, finally, the General Ledger.
Once the above is completed, Successware’s Reconcile Utility identifies and helps you resolve any discrepancies among your Accounts Receivable, Accounts Payable, and Pending Payables. This is a real time saver!
At the end of your fiscal year, after all the normal period end tasks are complete and the last fiscal period, has been closed, the system calculates your Income Statement accounts and posts the results to your Retained Earnings account. At that point, all income account balances are zeroed out and you can activate the new fiscal year!
If you have any questions about closing out your fiscal year in Successware, please reach out to our support team at 888.828.0170. If you aren’t currently using Successware and are interested in becoming a customer, please call us at 888.272.8009 or request a live demo.