Updated for 2022
It’s that time of year again! As we near the end of 2022, it’s time to focus on year-end closing preparations. In the fourth quarter of the year, your team will be compiling, reviewing, and reconciling, so start early and plan ahead.
What is year-end preparation for manufacturing companies?
Year-end preparation involves taking the necessary steps to be ready for closing the books at the end of the year. Year-end closing is the process of reviewing, reconciling, and verifying your accounting to ensure your finances are complete and accurate.
Preparation can include the development of a closing schedule, gathering of financial statements, and following up with unpaid invoices.
Year-end prep should be done at the end of your business’ fiscal year. Fiscal years often run January to December, but can also start from the day the business was registered. Make sure you know when the end of your business’ fiscal year is to prep for your year-end at the appropriate time.
Why is year-end preparation important for manufacturing companies?
Preparing for year-end closing ensures you have the documents, asset information, and strategy to complete your closing process. Completing accurate financial statements is imperative for a number of reasons. You want a clear picture of how your business performed over the course of the year so you can identify any place you may need to either change strategy or focus more resources. Additionally, in the case of an external audit, these records will be extremely valuable.
How can I make year-end preparation more efficient?
Utilizing an appropriate preparation method makes the process of closing your books significantly easier and can improve your accounting team’s efficiency. Your goal should be to have all necessary documents readily available and all payments squared away to allow for a simple closing process.
Here’s a checklist to help get your manufacturing team get started:
- Ensure all expenses are entered and make sense in their context
- Cross reference credit card and bank statements with information in your records to account for missing or duplicate entries
- Consider hiring a bookkeeper or accountant to aid in analyzing transactions
- Prepare your balance sheet, income statement, and cash flow statement
- Review accounts payable and accounts receivable to check for outstanding collections and debts
- Assess your tax situation and consider consulting with a tax professional to strategize and save money
- Evaluate budgets and goals for the past year and how your company performed
- Make adjustments to budgets and goals for the upcoming year
There are a few items manufacturing companies should pay special attention to:
- Reconcile your inventory. As a manufacturing business you most likely have an inventory of goods and equipment. It can be beneficial to count inventory in slow hours or employee overtime to ensure record are accurate. If any discrepancies exist, then reconcile your records and consider conducting a root cause analysis if there is a consistent problem in records.
- Be sure to document the details of asset purchases like machinery or equipment. Details to document include the cost of the asset, a description, the date put into service, and the amount of time used for business purposes.
- Determine if you qualify for section 179 write-off provisions for the current tax filing year. In some cases, it may be beneficial to spend more on equipment in order to qualify for deductions. Be sure to research potential tax deductions or reach out to your tax team ahead of the next tax season.
- Depreciate company assets accordingly. Manufacturing companies must calculate the cost of production when it comes to wear and tear of their equipment. The IRS strictly mandates how depreciation is calculated so it is essential to complete this correctly. It may be worth hiring a tax specialist to handle this aspect.
- Check on your employees. As a manufacturing firm, your employees are at the heart of every product you make, it’s important to ensure you’re meeting their needs. It may be useful to check on payroll rates, medical insurance programs, annual performance appraisals, and retirement plan options. As you move into the next year, you may want to verify how much tax you are withholding from your employees and ensure it meets IRS standards.
Corrigan Krause Can Help
The Corrigan Krause Manufacturing Group is here to help you navigate your company’s year-end preparations. Email email@example.com for more information and sign up for our Manufacturing Services newsletter here.