Annual financial statements are purely routine work? No! It is true that all professionals have a perfect command of their accounting software and know all the legal provisions very well. Nevertheless, annual accounts can never be purely routine. Why not? Quite simply: because the data for accounting comes from people. From the salesperson. From the product manager. From the marketing manager. From the caretaker. - People who implement new ideas, face new challenges and use new suppliers, service providers and services every year.
The real challenge for the annual financial statement lies in the completeness and correctness of the entries. Here is a small guide to help you prepare the annual financial statement perfectly.
Before you prepare your annual financial statements, it is important to know who is obliged to prepare them. The requirements depend on the legal form of the company as well as certain turnover and profit criteria.
The following companies and persons are obliged to prepare annual financial statements:
Exceptions and special regulations:
Once it has been clarified who is obliged to prepare annual financial statements, the question arises: what steps and preparations are necessary to ensure correct and complete financial statements? A structured approach saves time and minimizes errors.
A well-structured annual financial statement begins with a complete collection of all relevant documents covering the entire financial year. These should be compiled as early as possible to avoid wasting time searching for missing documents later on.
Important documents that should be collected throughout the year:
Tip: Set up clear processes for the regular transfer of receipts from other departments. Employees should be encouraged to submit receipts promptly to minimize the risk of forgotten or incomplete documentation.
Once all the documents have been collected, the real work begins: checking and processing the data to ensure that the accounting is correct and complete.
Account reconciliation:
Go through all accounts and reconcile the postings with the available documents. Particularly important:
Postings and transfers:
After the check, transfer postings are made to convert provisional values into final figures or to make corrections.
An example: If a service was rendered in December but not paid for until January, it is assigned to the old financial year by means of a transfer posting.
Depreciation:
Determine the depreciation for all relevant assets (e.g. machinery, vehicles, IT equipment). Depreciation is an accounting value that represents the loss of assets over time, for example due to wear and tear.
Tip: A central table helps to keep an overview.
Provisions:
Create provisions for obligations that have not yet been invoiced but are foreseeable - for example, for guarantees or possible tax claims.
Create a financial statement overview:
Finally, an overview is created that shows the current status of the balance sheet accounts (e.g. assets, liabilities) and income statement accounts (e.g. income, expenses). This forms the basis for the preparation of the final annual financial statements.
By collecting the documents in a structured manner and thoroughly checking and correcting the entries, you create the basis for legally compliant and clear annual financial statements.
The very first step is to take care of the "hard" data on the funds:
This information comes from account statements, securities lists and the inventory.
Before we even begin to think about depreciation, profits, losses, accruals, etc., we need to check that our accounting accounts match the "hard facts". This is the basis for everything else.
We all know: "No receipt, no entry". Often this is a human resource management issue - employees need to be encouraged to submit outstanding payment vouchers, expense claims and other submit relevant documents in due time. Here it is important to set clear deadlines and to demand confirmation from the departments that all receipts have been submitted. Of course, the receipts should be checked promptly. It is always annoying when you only notice weeks later that a payment voucher for 3,452 euros is not self-explanatory and the employee in question is on holiday...
Depreciation is a science in itself. There are not only a number of different depreciation methods, but also a colourful bouquet of rules and exceptions. Smart accountants therefore leave this discipline to their tax advisors. But beware: a smart depreciation policy requires accurate data! So make sure that all assets are documented in detail:
It is best to keep a central table that is linked to the original documents. (Tip: In Excel you can also insert links to local files).
Did you know that your own invoices are more often forgotten in accounting than supplier invoices? No joke. The reason is simple: if a supplier invoice is forgotten, a reminder flutters into the house. If your own dunning system does not work perfectly, receivables remain open longer than planned.
The following procedure has proved most successful:
In order for income and expenses to be allocated on an accrual basis, accruals and deferrals must be made:
Do not forget: When the new financial year opens, these items must be posted back again.
The easiest to check are paid invoices: These are reliably documented in the bank accounts and only need to be reconciled with the accounting accounts.
The recording of outstanding liabilities (accrual accounting) is more tricky. Here, too, ask your colleagues. Who still has open invoices on the desk that relate to the old business year?
The most sensitive, however, are liabilities that have not yet been invoiced:
Normally, such contracts are managed by the operational departments, not by the accounting department. Of course, we have to ask the departments to report in due time all liabilities received. It is also useful to check the last annual accounts in detail: Which recurring liabilities are recorded there? Do they still exist?
The following rule of thumb applies to the accounting of such liabilities:
Accruals are fictitious expenses. They are booked to adjust the profit and loss account, i.e. to avoid overstating the profit.
Common topics for provisions are:
Provisions should also ideally be made by the tax advisor. He knows best what is possible and permitted - and what is not.
What we can prepare, however, is an accurate list of possible provisions and documentation of the known facts:
After the annual financial statement is before the annual financial statement. Exactly one year ago, accruals and deferrals were already booked, provisions were formed and, if necessary, released again. In the current annual financial statement, one should take a close look at the beginning of the business year:
With Contract Management Software ContractHero you can manage all contracts centrally. This way, you will never again miss liabilities that were entered into unnoticed by the accounting department in another department.
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