Year-end is just around the corner - what have you forgotten?

As the end of the financial year approaches, CFOs face the challenge of reconciling numerous data points to present accurate financial statements, including balance sheets, income statements, and cash flow statements [1]. This pivotal period, falling between 6 April and 5 April of the subsequent year for most businesses, demands meticulous preparation and strategic financial planning to ensure compliance and maximize fiscal efficiency.

To navigate the intricacies of taxation and fiscal year-end responsibilities, finance teams must implement efficient processes, leverage technology, and engage in strategic planning for the upcoming year. By doing so, CFOs can prepare their teams not only to close the current year successfully but also to kick start the next financial year on a strong note, optimizing for revenue growth and operational efficiency.

Reviewing Payroll Records and Compliance Updates

In preparation for the end of the financial year, CFOs should prioritize the review of payroll records and compliance with the latest tax legislation to ensure accuracy and avoid potential penalties. Key areas include:

• Tax Credits and Legislative Changes:
  • Familiarize with the expiration of certain tax credits under the American Rescue Plan Act of 2021 and the extensions provided by the Inflation Reduction Act of 2022, including credits for health care benefits, non-business energy property, and clean vehicle purchases.
• Payroll and Employee Information:
  • Verify employee details, ensuring accurate addresses and records for departed employees.
  • Double-check W-2s for correct Social Security numbers, taxable benefits, and establish a secure portal for document access.
• Compliance and Record Keeping:
  • Review health insurance policies against ACA requirements and the IRS 2024 Employer Health Plan Affordability Threshold.
  • Confirm year-end bonuses, wage updates, and ensure compliance with state or local minimum wage increases.
  • Maintain comprehensive personnel files, including employment agreements and confidential records, adhering to retention guidelines (e.g., I-9s for three years post-hire or one year post-termination).

CFOs must also stay informed of all accounting standards and regulatory requirements to ensure the company’s compliance, thus safeguarding against audit complications.

Finalising Year-End Tax Documents

Finalizing year-end tax documents is a critical step in preparing for the end of the financial year. This process involves several key actions:

• Gathering Documentation: Ensure all necessary documents are collected, including CARES Act Employee Retention Credit details, FICA and FUTA reports, Affordable Care Act compliance documents, and records of payments to independent contractors.
• Filing Deadlines: Adhere to crucial filing deadlines to avoid penalties:
  • W-2s by January 31
  • ACA reporting by March 4, 2024
  • EEO-1 reporting in Fall 2023
• Updating Information for Tax Compliance: Stay informed of changes in tax legislation and update relevant financial information accordingly:
  • The Social Security taxable base wage increase to $168,600
  • Adjustments in standard deductions and limits for qualified fringe benefits, retirement contributions, HSA, and FSA contributions for the tax year 2024

It’s also essential to leverage services such as those provided by KBS CFO, which include a comprehensive year-end close package. This package aids tax professionals in thoroughly reviewing and reconciling financial transactions from the past fiscal year, ensuring no detail is overlooked.

Moreover, utilising outsourced CFO services can streamline financial management throughout the year, leading to more efficient tax preparation and planning. Finally, understanding the types of financial statements (compilation, review, and audit) and their respective levels of assurance can guide CFOs in choosing the right level of service for their business’s needs, thereby enhancing the credibility of their financial reporting.

Implementing Efficient Processes and Technology

In the quest to prepare for the end of the financial year, CFOs must address inefficiencies within finance and accounting processes that directly impact the business’s bottom line. Key challenges include:

• Inefficient Processes: Streamlining operations by reviewing and refining existing workflows.
• Fraud and Duplication: Implementing checks to prevent redundancy and secure financial data.
• Data Management: Leveraging Business Intelligence (BI) tools for enhanced data accuracy and forecasting.

To combat these challenges, adopting a strategic approach is essential:

1. Automate Financial Processes: Utilize technology for automating purchase orders, invoice approvals, and travel reimbursements. This not only reduces manual data entry but also speeds up approval processes.
2. Implement BI Solutions: BI tools offer granular insights into forecasting and planning, improving accuracy by allowing CFOs to back-test forecasting logic against actual data. These tools also facilitate the comparison of multiple forecasts to actual results, aiding in identifying and addressing variances.
3. Leverage Prophix Software: A tool like Prophix can significantly expedite the year-end close process, with steps including engaging audit committees early and leveraging technology to optimize processes.

By addressing these areas, CFOs can ensure a smoother transition at the end of the financial year, enhancing profitability and minimizing risks through automation and strategic planning.

Strategic Planning for the Upcoming Year

As CFOs navigate the complexities of the end of the financial year, strategic planning for the upcoming year becomes paramount. The evolving role of CFOs underscores the necessity of integrating technology, sustainability, and ESG requirements into financial planning and reporting. Here are key areas of focus:

• Technology and Automation:
  • Embrace cutting-edge financial technologies to streamline operations.
  • Automate repetitive tasks to free up resources for strategic activities.
• Sustainability and ESG Integration:
  • Proactively incorporate ESG factors into financial planning.
  • Stay informed on evolving ESG regulations and stakeholder expectations.
• Dynamic Role Adaptation:
  • Transition from traditional financial management to a more strategic, value-creation role.
  • Allocate resources efficiently to drive sustainable growth and innovation.
• People Management and Team Development:
  • Focus on building a culture of agility and resilience.
  • Invest in upskilling opportunities to retain and attract top talent.
• Supply Chain and Cost Management:
  • Conduct end-to-end supply chain analyses to identify improvement areas.
  • Engage in joint demand planning with customers and assess critical suppliers.
• Financial Resilience:
  • Ensure thorough understanding and management of financial positions and cash flows.
  • Prioritize reducing debt levels and enhancing teamwork for integrated business planning.

By focusing on these strategic areas, CFOs can effectively prepare their finance teams for not only concluding the current financial year but also for embracing the challenges and opportunities of the upcoming year.

Only 12 months to go!

As we reflect on the strategies and best practices outlined for CFOs to prepare their finance teams for the end of the financial year, it becomes clear that a blend of meticulous data review, compliance adherence, and strategic forecasting underpin financial success.

From ensuring payroll records are up-to-date and compliant with current legislation to finalizing year-end tax documents and leveraging advanced technologies for efficient processes, these steps are crucial for a smooth transition into the new financial year. Furthermore, adopting strategic planning with an emphasis on technology, sustainability, and team development sets the groundwork for sustained growth and innovation beyond the fiscal year-end.

Ultimately, the role of CFOs extends far beyond merely closing books; it encompasses steering their teams towards fiscal efficiency, compliance, and strategic foresight. By implementing the discussed proactive measures and focusing on areas such as automation, ESG integration, and financial resilience, CFOs can not only navigate the complexities of the year-end closing successfully but also position their teams for a prosperous financial year ahead.

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