An article by Svetlana Krapiventseva, head of the IFRS practice of KSK GROUP, published in a practical journal on financial management.
The fast close system for quickly closing the reporting period is a set of activities for preparing reports within 1–4 weeks after the end of the year.
According to the experience of KSK GROUP, accounting costs reach 20% of companies' overhead costs. The number of accountants, despite automation, is not decreasing, and the main task - generating reporting information for management - is solved last, after reporting to tax authorities and statistical authorities. Reporting is needed first of all by management, secondly by investors. The shortage of operational data forces us to look for ways to reduce reporting deadlines.
The practice of a number of companies to prepare annual reports by June is an anachronism. 6 months after the end of the year, reporting results deprive management of the chance to quickly influence operational activities. You can still do something in January, but not in June. And even in February, sometimes it’s no longer there.
Reporting is slowed down by counterparties and colleagues
Accounting explains the late reporting deadlines by a lack of documents or reconciliations from counterparties that are too important for the business to set conditions on them. But our experience speaks of other inhibitory factors, including within the company:
- checking department reports (HR department, production, warehouse, etc.);
- reconciliation of balances in the warehouse and accounting;
- formation of estimated liabilities and accrual of reserves;
- carrying out verification and audit procedures;
- release of reports (formatization, publication, protection).
Working to quickly close the reporting period, we divide difficulties and solutions into four groups:
- Interaction with counterparties.
- Contradictions between divisions within.
- Problems of control and methodology.
- Integration of accounting systems (trade, warehouse, payroll, accounting, management and IFRS).
According to the experience of KSK GROUP, the greatest effort is required to resolve contradictions between divisions within the company.
Figure 2. Structure of problems in reporting
What happens to the money?
It is impossible to close an account with a positive balance, because it contains the organization’s money and must be withdrawn.
In the application for closure, you must request to transfer the balance to the details or do it yourself. There is also the option of receiving the balance in cash, but this is only if there is a small amount left.
If the client is confident in the decision to close, then it is better to leave on the balance the amount that is enough to charge the bank commission, and transfer the rest to other details independently. This will make the procedure faster.
Counterparties: accelerate what is possible, evaluate what is impossible, and distinguish one from the other
Delaying reporting deadlines does not exempt you from making corrections in the next year, and is therefore pointless. When implementing quick closure of the reporting period, you must decide to recognize transactions without official documents. The goal is to reduce the number of such operations to a minimum.
Each counterparty has a last name, first name and patronymic, and within the company. The responsibilities of a specific employee include responsibility for submitting documents or information on time. For example, managers are responsible for buyers; the fact of shipment of goods or provision of services without a signature in the document is confirmed by the terms in the contract.
Example
In an advertising holding company, linking the variable part of client managers' salaries to the documentary discipline resolved 90 out of 100 issues regarding the collection of documents from counterparties.
Problems arise with monopolies and geographically distant counterparties. In such cases, the accruals method is used to speed up the process.
This means that the approximate amount is known already on the last day of the reporting period.
Example
The logistics manager of the railway wagon operator Ivanov A.M. will not achieve the receipt of documents from PJSC Russian Railways on the same day, but will draw up a certificate-calculation of transportation costs using data on tariffs, tonnage and kilometers.
There are few such Russian Railways, but for other suppliers you can get documents on time using competition in the market, payment and other methods of persuasion.
Introduction
According to the accounting methodology in our country, as well as in accordance with current legislation, the single financial reporting year for all enterprises, including agricultural ones, is the calendar year, which begins on January 1 and ends on December 31 (inclusive). Thus, all facts of the financial and economic activities of enterprises occurring during this period must be recorded in accounting, assessed, grouped appropriately and ultimately reflected in the annual financial statements.
The peculiarity of agricultural organizations in this case is that it has a long production cycle for the main activity, as well as a pronounced seasonal nature of production. Therefore, accounting for the production process and all the ensuing consequences at enterprises in the industry cannot be closed in the middle of the agricultural year. This means that all necessary accounts must be closed at the end of the period, when major work has been completed and basic financial indicators have been generated.
During the financial year, the write-off of produced products, works and services from the credit of cost accounting accounts is carried out at planned prices approved by the farm. At the end of the reporting year, as a result of the generated actual amount of costs, the cost of products (works, services) is brought to the actual cost by drawing up additional entries or the “red reversal” method.
Regulations and automated business processes eliminate internal contradictions
Accounting depends on information from related departments: personnel, production, construction site, supply, warehouse. Quick closure involves all departments and achieves results thanks to regulations and an automated business process management system.
The regulations fix decisions: deadlines for timesheets, payroll calculations, input of fixed assets, acts on construction contracts, cost calculations, etc.
An automated system manages data collection mechanically and impersonally, avoiding internal conflicts.
Example
The meat processing plant (farms, processing, transport unit and a network of retail outlets under a single brand) uses the “First Form” electronic document management system. On the 25th of the month, tasks are formed for the responsible persons: fill out time sheets, close calculations, attach calculations and other documents. The completion of the task is recorded by the performer and the accounting department, and information about violation of deadlines flows to management. Sanctions for violations are calculated automatically and adjust the variable part of remuneration.
“First Form” is one of the solutions for automating business processes on a par with foreign ones (IBM Notes, EMC Documentum, etc.), as well as Russian ones [EOS (Delo), “1C” (“1C: Document Flow 8”), DocsVision, Directum, etc.]. Partial tasks can be solved through Outlook MS.
Sequence of closing accounts at the end of the reporting year
Closing of accounts should be carried out in the following order: initially, cost accounts of those productions that during the year produced the largest amount of products (work, services) for other production facilities of the economy and consumed the smallest amount of similar products (work, services) should be closed, then in descending order.
Based on this principle, it is recommended to close accounts in agricultural enterprises in the following order:
1. Initially, based on the results of the inventory, based on the management decisions made, account 94 “shortages and losses from damage to valuables” is closed.
2. Close all subaccounts of account 23 “Auxiliary production”, except for subaccount 23-3 “Machine and tractor park”.
3. Subaccount 23-3 “Machine and tractor park” is closed.
4. Distribute deferred expenses, general production and general business expenses.
5. Distribute or adjust the amounts of depreciation and deductions for the repair of fixed assets according to separate crop production accounts.
6. Calculate the actual cost and write off identified deviations in the main industries (crop farming, livestock farming, industrial production) and close account 28 “Defects in production”.
7. Close account 29 “Service production”.
8. They clarify the costs of capital investment accounts and, if necessary, write them off.
9. Determine the results from the sale of main types of products and other types of income and expenses and close accounts 90 “Sales” and 91 “Other income and expenses”.
10. Write off the profit (loss) and close account 99 “Profits and losses”.
Before drawing up this procedure, for the purposes of the process of closing accounts and avoiding arithmetic and logical errors, it is recommended to draw up a preliminary working balance, which will show both the turnover for the reporting period and the final balance at the time of the start of such a procedure.
Control procedures and methodology make it easier to run a business, not the life of an accounting department
Control issues are resolved not as a separate task, but simultaneously with the description of the business process through the separation of powers, approval and system settings.
Example
In a company (repair of cash registers in hypermarkets), when entering into an agreement in 1C, the deadline for completing settlements under it is indicated. If payments are not completed on time, a reminder appears and the service is suspended.
Delays in closing a period occur when not all information is entered during data entry. Such “optional” fields as “cash flow item”, “method of construction of fixed assets”, etc. are filled in formally or not filled in at all. The “correct” system controls such places and provides specialists with access to a source of information - a scanned copy of a contract, letter or invoice.
Example
In one development group with foreign ownership, all scanned copies of documents are attached to the accounting system for a specific operation.
This is probably unnecessary for an ordinary transaction, but is vital for contracts, payment grounds, loan transactions, construction, assignment and other non-standard events. The range of such documents is determined in the regulations, excluding searches for the original, replication and collection for auditors.
The accounting methodology serves the company's goals, so all accounting policies are based on the real needs of the business, and not the comfort of the accounting service.
Example
Office renovation company A+ provides a one-year guarantee to customers who retain 3.5% of the contract as security. According to the company's experience, work is completed in 98 cases out of 100. This practice does not indicate poor quality of work, it is a demonstration of loyalty to the client. Recognizing the deduction in income after a year allows you to correlate the costs of warranty repairs. Although it was convenient for the accounting department to include in income the entire amount of the act at the time of delivery of the object.
Revaluation of assets, impairment testing, assessment of deposits, calculation of reserves can be organized in advance. After all, it is difficult to create basic models, but in ready-made ones, a complete recalculation is carried out quickly. To do this, contracts and methods are agreed upon in advance with external contractors, and auditors are invited to the intermediate stage.
The unified information complex is built on the principle “each event is processed in the system once”
A unified information system for the entire company is from the realm of IT science fiction. Modern solutions that integrate with each other are formed into a flexible and independent system according to the principle of a designer, using data from one system in another without re-entering.
Example
In a 4* hotel complex on the Black Sea coast, the following programs were used: fidelio (hotel), r-keeper (restaurant complex), Spa (spa complex), “1C: Accounting”, “1C: Salary”. Everywhere there were reference books, data flowed into 1C after manual processing in Excel. As a result, the owner received short signs by March 30, unverifiable due to the impossibility of “failing” into the numbers.
The possibility of integration is the main principle when choosing automated systems, which requires compliance of program modules and a unified reference system. Identifying the information needs of all users allows you to process and enter an event into the system once for everyone.
Example
Accountant Maria does not need information about the maturity date of debt securities, but lawyer Peter does. To prevent a lawyer from maintaining a separate register, the system needs additional fields for entering data on the legal side and reports in the required sections.
Previously, charts of accounts were used for various purposes, however, modern systems store information in registers, of which there are as many as desired. When entering an event, they indicate in which registers it should be reflected, while repeating information is copied, and differing information is entered separately. Data from registers is linked to charts of accounts for financial accounting, and for non-financial accounting (sales, production, warehouse, etc.) they generate reports on registers in a form that is convenient and customizable individually for the user.
Figure 3. A unified accounting system provides information to all company services
Closing deadlines and service fees
The period for closing a current account with Tinkoff or any other Russian bank depends on the balance of funds in the account.
If the account is empty, the account will be closed for the day. If money is present, the amount of time it takes to close depends on the client's reaction speed in relation to the management of money.
Closing an account is easy if there are no debt obligations. Difficulties arise only when there is an unwillingness to deal with the issue in a timely manner.
Then there is the possibility of losing the remaining money or accumulating debt for servicing an inactive account. It will be more difficult to close a current account if there are debts to the tax office.
Then the amount of funds in the account goes to closing debts. Only after repayment can you close the current account. If there is no money left in the account, the bank will refuse to close until the account is replenished with the amount required to pay off the commission.
Tip 1. Identify errors in accounting.
Errors in accounting are much easier to correct immediately, that is, in the current year, rather than worrying about this problem in the coming year. If you find small, trivial errors, then you should not neglect to solve them. They can cause a lot more problems in the long run. With large, significant errors, things are different. If you were able to find such errors only in the reports that have already been compiled, then it (the reports) needs to be completely redone, and only then given to the manager for signature.
Accounting policy
The procedure for maintaining accounting and tax records is fixed in the accounting policy of the organization (PBU 1/2008). The accounting policy is approved upon creation of a legal entity and is valid throughout the entire activity.
Every year, the accountant must review the adopted accounting policies to determine their compliance with actual accounting practices. If the organization's operating conditions or accounting methods have changed, it is necessary to review the accounting policies. Also, changes to this document must be made if new legal requirements appear.
Starting from 2021, the cost of depreciable property will increase from 40 to 100 thousand rubles (amendments were made to Article 256 and Article 257 of the Tax Code of the Russian Federation by Federal Law No. 150-FZ dated 06/08/2015). If the accounting policy specifies the procedure for classifying depreciable property, adjustments should be made.
How to close an account upon liquidation of an LLC
The head of the organization during liquidation cannot use the current account and close it.
If the company is liquidated voluntarily, then all powers are transferred to the liquidation commission or liquidator. In case of bankruptcy, the company is liquidated by a bankruptcy trustee appointed by the court.
To close an account during liquidation, the company needs to add to the package of documents a decision on the appointment of a liquidator or a court decision on the appointment of a bankruptcy trustee.
It is better to close the account after you submit the liquidation balance, but before making an entry about the liquidation in the state register. The law does not regulate the procedure for closing an account, so companies that closed the account earlier then solve the problem of paying taxes.
Notification of the Federal Tax Service on the procedure for paying income tax on separate divisions
Organizations that have several separate divisions in one subject of the Russian Federation can choose a responsible division and pay income tax for all divisions through it. The tax authority must be notified of this decision by December 31. Notifications are also submitted to the tax authority if the enterprise has changed the number of structural divisions on the territory of a constituent entity of the Russian Federation or other changes have occurred that affect the procedure for paying tax (clause 2 of Article 288 of the Tax Code of the Russian Federation).
Nuances for individual entrepreneurs
If an account is closed by an individual entrepreneur, then the following steps are followed:
- a statement is requested for all accounts opened with the bank;
- existing debts to a banking institution related to issued loans or payment for services are repaid;
- an application is submitted on the basis of which cooperation is terminated.
Although the application can be drawn up in free form, it is advisable to use forms issued to clients by bank employees.
