Facing the year-end challenges head on!
Most business activity is cyclical in nature. Periods of high activity and tight deadlines are interspersed with the more casual phases when most employees catch up on their training programmes or do a bit of administrative work. For finance and accounting professionals, business activity peaks just before the closing of the financial year. They must not only prepare the report card for the company for the preceding year, but also plan for the next one.
Every business, every department and everyone might have a unique approach to the year-end, but there are certain challenges which almost everyone faces. Here we look at a few of them.
Most companies utilise enterprise-level software suites to ensure that they are always ready from a “data sourcing” point of view. However, it can still get tricky during the financial year end as there are bound to be more than a few cases where manual adjustments or sanity checks are necessitated. If there is a requirement for international consolidation, then that just adds another layer of complexity on top.
The year end financial closing is a labour of love for most professionals. The result of this process is usually the most scrutinised and publicised document that the company produces. The actual effort involved might depend on the level of automation or other processes that a company follows, but the importance is paramount for almost everyone involved.
Budgeting and Planning
Most departments start the budgeting process for the next year a few weeks in advance. This is usually a complex and iterative process, especially for the finance department which must ensure that the individual, departmental numbers fit the overall “big picture” target of the entire organisation. Some companies have adopted a dynamic budgeting process where they essentially treat every day as a planning day, but the annual numbers still matter to most.
Preparing for the appraisal cycle
Finance and accounting departments not only have to complete their own appraisal cycles, but also present the near-final numbers to other departments as well. For business units still racing to meet their annual targets at the last minute, this usually means long nights and a constant need for updates for all involved. The bright side is that this process usually ends up being a rewarding experience for everyone!
Most companies would not have all vendor or client contracts falling due for review or renewal at the same time. However, the year end is an ideal time to plan, especially if vendor costs are a key component of the annual budget. It’s also a good time to assess the profitability of each client and assess whether resources are being spent to cultivate the right relationships.
The finance/ compliance department is expected to monitor various thresholds (like the liquidity situation or overdue receivables etc.) on an ongoing basis. However, the biggest chunk of the periodic compliance checks usually falls due during the financial year end. This could be especially stressful since year-end reports are monitored more closely by the senior management as well as other stakeholders and any deviations might lead to drastic action or even stronger controls.
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