Month-End Closing Checklist for Better Accounting in 2022

Are you a new business struggling with month-end closing? Don’t worry, you’re not alone. A lot of new businesses and entrepreneurs struggle to keep up with their accounting books. As soon as they realize the urgency of finishing accounting tasks and reconciling accounts, another month passes. As a result, they fall behind in recording transactions. 

Closing your books at the end of the month can be really stressful and time-consuming if you don’t know what to do. If you want to simplify your accounting responsibility of closing your business books, we have some serious tips for you. 

In this blog, Finsmart will share a month-end closing checklist for better accounting in 2022. We have outlined major accounting tasks that require action over the fiscal period. 

Are you ready to explore our month-end closing checklist? Let’s go! 

#1 Create a closing schedule 

Since you are a thriving business, it is pretty obvious that you have so much going on every month. From finance to marketing, production, surveys, shipping, and customer support – there is no dearth of tasks you have to carry out to operate your business effectively. No wonder, memorizing dates for performing accounting tasks is really difficult and frustrating in a crazy work schedule.   

That’s why we suggest business owners not waste their valuable headspace memorizing a bunch of dates. Instead, note down all important and relevant deadlines. Prioritize each accounting task according to upcoming due dates. That way, you will be able to prevent delays and inefficiencies during month-end closing. 

month end close checklist

#2 Record incoming cash 

The next important accounting tip of our month-end close checklist is about maintaining cash records. Put all incoming revenue totals, whether they have been remitted or due in writing (along with sources). Our accounting experts suggest business owners put the following incoming cash on record: 

  • Revenue
  • Loans
  • Invoice payments 

Measure the differences between your invoices and bank statements to make certain that you aren’t overlooking any outstanding customer payments. If there’s a payment in due or you find any sort of inconsistencies, manage them right away. Send customers a reminder of the amount due. Put any late fees into practice if required. 

Learn about outsourced bookkeeping services in India

#3 Reconcile accounts 

Let’s be honest. Based on how efficiently you have regulated your expenses during the month, this step can either be a piece of cake or back-breaking on the month-end closing checklist. Reconcile every transaction with your bank account statements.

Break your account into the following categories: 

  • Cash, cheques, and saving accounts
  • Prepaid or accrued account
  • Bank loans and notes

Pick one option first. Start working on it carefully. Make strides for others afterward. This way, your business accounting will stay streamlined and you’ll be able to catch errors at month-end closing with ease. 

accounting month end close checklist

#4 Update accounts payable 

Account payable is really important to track what is owed to suppliers; ensure your payments are properly approved and accurately processed. All these will help you produce an accurate balance sheet. But let’s be honest. Since you are a business owner, you probably don’t have time to record transactions every day. True, isn’t it? 

How about writing your purchases and organizing receipts? You will be able to keep your account payable in perfect form in that manner. After reconciling transactions, record them in your accounting books at the end of each week. Cross-check your records to make certain you have covered up all bills and invoices during your monthly close. 

Outsource AP and AR services in India if this report doesn’t make any sense to you.

#5 Review assets 

One of the most important accounting tips on our month-end closing checklist. Assets are resources that are owned and controlled by a business. Building, machinery, raw materials, furniture, inventory – all of these are your business assets. Although assets don’t convert directly into cash, they can depreciate in value over time. 

In other words, they are long-term items that add value to your business. When closing your month-end accounting book, record any payment related to your business assets. Note if you have made any new purchases or transactions related to fixed assets.

#6 Count inventory 

The next accounting tip of our month-end closing checklist is to perform monthly inventory counts. Businesses that aren’t using an automated inventory management system or haven’t hired or outsourced accounting management services to keep on top of their inventory status often expose themselves to overselling and ruffling customers for items they want to buy from you. 

You don’t want those things to happen to your business, right? If your answer is yes, start performing monthly inventory counts. By doing so, you will be able to figure out what items you need to replenish and identify products that will expire by a certain date. You will be able to make adjustments and reconcile your books after covering all end-month accounting actions. 

#7 Check revenue and expense accounts 

Another important accounting tip from Finsmart’s month-end closing checklist! Review your revenue and expense accounts. Make certain you recorded them in the correct account for a specific period. Write down all the sales and revenue for the time period you’re analyzing. Add together all costs of producing each product for sale. Be sure accruals and prepaid expenses are recorded in your books in the right manner. 

9 known benefits of outsourcing accounting and bookkeeping services

#8 Review your work 

Remember how we used to double or triple-check our exam paper before submitting it to the teacher? Just like that, you should consider having a second set of eyes review your work before completely closing business accounts at month-end. After reviewing your work by yourself, ask your manager or supervisor to have a look at your books. 

Ask them to review your accounting information and tell you if it is accurate. That way, you can substantiate your business’ strategic financial planning is formulated on a healthy foundation. 

monthly closing checklist

Month-end close checklist 

Closing your accounting books is really important for businesses. It demonstrates the monthly financial status and also shows which areas require attention. With this, our month-end account close checklist ends.  

Got any queries to ask? Send them to info@finsmart.co.in and have them answered by our accounting experts.

Check out these services as well if you operate or want to scale in India:

Outsourced payroll services in India

India entry services for global MNCs

7 things to keep in mind while outsourcing accounting to India 

 

Technology Transformation for your Accounting Process – Finsmart

Over the years, technology has transformed the way businesses function. The digital transformation is taking place in core operational areas as well as central functions including accounting and finance. Evolving technologies such as Machine Learning, Artificial Intelligence, Robotic Process Automation, Cloud Technology and Blockchain have made accounting more efficient and easier. 

The recent survey conducted by Ernst & Young highlights that 92% of finance leaders across 89 corporates are on the path towards introducing digital transformation in the accounting and finance function. As per Statista report, the worldwide spending on digital transformation technologies and services is expected to be 239 trillion U.S. dollars by 2024.

Today, more and more organisations are reaping the numerous benefits of digitization in the accounting process and carrying on day-to-day tasks in a timely, effortless, and accurate manner. And some of the outsourced accounting firms have been leading in the forefront of digitization where the organisation gets dual benefits of outsourcing cum digitization with lesser hassles. Take a look at some of the positive changes that can be achieved in the accounting process by embracing digitization.

Benefits of Technology in Accounting Process

  • Streamlined System and Processes

Digitization results in a streamlined accounting process that follows a definite standard, leading to overall improved performance. Digitization enables real-time access to important data and information as everything is stored on a centralised cloud system. 

  • Easy Access to Financial Information

With the use of advanced accounting software, reporting tools and dashboards, you can create financial reports such as cash flow statement, profit and loss report, balance sheet, working capital report, etc. within minutes. Besides, you can even set it on auto pilot mode where in the moment you do a monthly closure of books these reports are made available to you in a fly. Integrated systems and real-time reporting help you to access information at any time and from anywhere. This helps management make strategic decisions with increased accuracy, speed and reliability.

  • Enhanced Data Security

With the growing number of cyber-attacks, data safety and security is the topmost priority for every organisation. New-age cloud based accounting tools allow you to back up your data and secure it safely on a multi-server environment with the help of security measures such as encryption, authorized access, two-factor authentication, firewalls, etc. And these systems are available on a monthly subscription so organisations don’t have to investment in creating these sophisticated infrastructure.

  • Saves Time

Digital accounting makes the entire process of accounting much faster, whether it is budgeting, invoicing, reporting, or statements. A recent survey conducted by the Institute of Management Accountants states that accounting teams spend more than half of their time on low-level administrative tasks. Among the 800 participants who took part in the survey, over 50% believe that automation can reduce the administrative burden and enable them to focus on key business tasks. 

  • Cost-Effective

Digitization reduces the need to hire a team of professionals to manage the accounts of a business. Moreover, the adoption of digitization leaves no room for manual errors as data is automatically recorded with the help of accounting tools and software. This eliminates the cost that would have otherwise incurred on rectification of manual errors. All of this results in drastically reducing the operational costs of business. 

  • Business Continuity and Remote Accounting team

Digitization was biggest boom in the era of this pandemic since the least impacted businesses were those that used these accounting and financial technologies. They were able to set remote accounting team leading to zero business disruption. Digital transformation has enabled such organizations to respond and thrive during the pandemic.

Digital Transformation in Finance and Accounting

 

The emerging digital technologies are making it simpler for businesses to manage their operations more efficiently. Implementation of these technologies facilitates the development of timely financial insights and helps you gain a competitive edge in the market. 

With the countless benefits of digitization, it is time that you set up a digitization plan for your accounting process. Finsmart is a leading player in Outsourced Accounting and Payroll Services. We use these powerful technologies that contribute to digital transformation in the financial sector. We also help you implement and use technologies such as Machine Learning, Artificial Intelligence, Cloud Accounting, and Dashboarding tools to gain complete financial transformation resulting in better business decision making and thereby help scaling your business. 

New Section 206AB and 206CC on TDS & TCS comes into effect from 1st July 2021 – Finsmart

A new section is introduced in the Finance Bill, 2021 for deduction and collection of tax at source at higher rates if an amount is paid or payable to the specified person who did not file the income tax return which will come into effect from 1st July 2021. Section 206AB for TDS is inserted after section 206AA of the income tax act. Section 206AB provides for deduction of TDS at higher rates for non-furnishing of Permanent Account Number (PAN). Similarly, section 206CCA for TCS is inserted after section 206CC of the income tax act.

Here is more about this section :

  • Brief Description Section 206AB and 206CCA
  • Applicability of this section on the type of transactions
  • Conditions to deduct TDS or collect TCS
  • Rates applicable for TDS
  • Rates applicable for TCS
  • Example

Brief Description Section 206AB and 206CCA

Section 206AB provides TDS or tax deduction at source on amounts paid or payable to the specified persons not filing their income tax return at rates higher than specified in the act.

Similarly, section 206CCA provides tax collection at source (TCS) on amounts received by a specified person at rates higher than specified in the act.

Applicability of this section on the type of transactions

The nature of the transaction can be any transaction excluding the following:

  • Salary
  • Premature withdrawal of EPF
  • Winnings from any lottery or card games or crossword puzzles  
  • Payments to contractor
  • Income with respect to investment in securitization trust
  • Winnings from any horse races
  • TDS on cash withdrawals

Conditions to Deduct TDs or Collect TCS

The tax shall be deducted/collected at source if the payment/collection is made to/from the person satisfying the following conditions:

  • The person does not file income tax return for both of the previous two Financial Years (FYs) immediately before the FY in which tax is required to be deducted,
  • the income tax return (not belated return) filing due date is expired and 
  • The total amount of TDS and TCS is Rs.50,000 or more in each of these two previous years.

It does not apply to a non-resident who does not have a permanent establishment in India. Permanent establishment for this purpose includes a fixed place of business where the enterprise’s business is carried out wholly or partially.

Rates applicable for TDS

The tax shall be deducted at source (TDS) on higher of below:

  • Twice at the rates prescribed in the relevant provisions of the income tax act.
  • At five percent.

In addition to non-filing of income tax return, if the specified person does not furnish PAN, then the TDS rate shall be higher than the rates prescribed in this section or section 206AA of the income tax act.

Rates applicable for TCS

The tax shall be collected at source (TCS) on higher of the following;

  • Twice at the rates prescribed in the relevant provisions of the income tax act.
  • At five percent.

In addition to non-filing of income tax return, if the specified person does not furnish PAN, then the TCS rate shall be higher than the rates prescribed in this section or section 206CC of the Income Tax Act.

Example

An ABC company or a Firm makes a Contractual payment of Rs. 80 lakhs to M/s XYZ for the preceding two previous years (FY 2019-20 and FY 2018-19). The tax was deducted at 1% (Rs. 80,000 each year) by the company.

M/S XYZ did not file him IT return for both the years and the due date of filing the return has expired.

Hence, when the company deducts tax in the FY 2020-21 and learns that the payee has not filed his ITR for the last two years, the TDS should be deducted at higher of the following:

  • i. Twice the rate prescribed in the Act, i.e. 2% (twice of 1%), or 
  • 5%

Hence, the tax should be deducted at the rate of 5%.

Further, if PAN is not furnished, then TDS shall be deducted at the rate of 20%, which is higher than 5% or 2% (twice 1%).

Shalaka Joshi: Finsmart Solutions Pvt. Ltd. The CEO of Magazine India

We strive to build a global outsourced accounting and payroll organization that is recognized as a Trusted Growth Partners for its clients and employees,” shared Shalaka Joshi, on what drives her to jump out of bed every morning.

For decades now, traditional accounting has been replaced with digitized solutions. In parallel, for the longest time, women limited in certain roles have eventually broken the glass ceiling to transform into fierce, focused, and fabulous businesswoman. One such woman, who has revolutionized a historically male-dominated industry of numbers, is Shalaka Joshi.

Finsmart Solutions, an incredible business in her own right, entered the Indian outsourced accounting landscape in 2006, to revolutionize the industry as one of its kind. Offering dedicated finance and accounting services when outsourcing accounting was not familiar to most mid-sized and small-sized brands, the brand successfully carved a reputation for itself as a single destination for accounting, taxation, and payroll compliances for various business entities.