Orchestrate Beverage Accounting Year-End Close Considerations

Closing Year-End is Like a Month-End Close on Steroids

iStock_000053082372_Small.jpg2015 is coming to an end and 2016 will be here before we know it. It is time to starting thinking about closing 2015 and drafting resolutions for 2016. Let’s talk about ending 2015 first. Closing year-end is like a month-end close on steroids. Because so many people look at the year-end financials, you owe it to yourself and your readers to do the deep house cleaning on the December financials. Start with a detailed listing of tasks.  Make sure that note when each task was completed.  That will allow you to understand timing.  Need some help starting the close process?  Take a look at Orchestra's month-end close page.

For year-end, pay special attention to the balance sheet. Go through the balance sheet with a fine-toothed comb. First, verify balances against third parties (ie. Checking and savings accounts, credit cards, and loan amortization tables,). If you are under audit, you will have to do additional procedures to verify balances (such as accounts receivable and payable confirms).

Take a critical look at aged accounts receivable and payable. Try to collect on old invoices, write-off those that are realistically uncollectible. Payout credit balances. I’ve seen several aged credits that are just hanging out on the balance sheet for multiple periods (even years!). Keg deposits are the worst. Just because they have ordered a keg once, does not mean that they will order on a regular basis. Cut the cord and pay it out. Payables are the same way.  Apply the credit or ask for a refund. There isn’t any value to having old balances sit on the financials.

Clean up all of the Open Document Lists and Count All of the Inventory Items

Next, make sure all of the OBEER document lists are up to date. When was the last time that you audited purchase orders or goods receipt POS? I would even go into the bank account and credit card reconciliations. You can’t trust a system if it does not reflect reality. Making sure that you don’t have any duplicate documents or shadow documents out there will go a long way towards making the system reliable. The next step is to count everything (even the finished goods archive and barrels that you don’t look at very often). This is the time to get rid of old and stale inventory. Ask operations to cut the cord and get rid of old and stale inventory items (that includes stale beer). Almost everything is perishable in our industry and it is time to make a deamination that everything on the shelf will be used one day. Pay special attention to what is on the shelf versus what is in the system. We tend to count the items in the system, but we tend to turn a blind eye to the items not in inventory. Learn to recognize inventory items and walk through the warehouse on a regular basis. You will begin to see those items that are potentially forgotten.

Never Close a Period with Open System Account Balances

Then, look into all of those pesky system accounts. Orchestra does a good job giving us a pathway for success. They create account determinations with live accounts and system accounts. Since every determination needs an account, Orchestra uses system accounts to fill out the blanks. System accounts were never meant to be used. They are supposed to be inactive. If you can complete a transaction because a system account is inactive, then it means that the account determinations need to be updated with the new activity. Sadly, many users blow by the warning. They activate the system account to finish what they are doing. That is what creates system account balances. There are system assets, liabilities, equity, revenue, cost of goods sold and expenses. YOU SHOULD NEVER HAVE ANY SYSTEM ACCOUNT BALANCES. IF YOU DO, THEN SOMETHING NEEDS TO BE FIXED. THE PROBLEM WILL CONTINUE TO GROW UNTIL YOU FIX IT. Troubleshooting system accounts is one of trial and error. First find the document that created the balance and then compare it to the journal entry. Once you find the balance, then determine what action created the balance. Then change the account determination and journal entry the balance to the correct account.

Review the Entire Trial Balance

Now pull up the trial balance and review every balance. The trial balance is a listing of every account in the system and is organized by the balance sheet and then by the income statement accounts. Carefully go through each balance. Flag those accounts that don’t make sense. IF YOU SEE SOMETHING, SAY SOMETHING. Do this when you have plenty of time. You don’t want to skip over account errors just because you are out of time.   It is important that you mark everything that you see. Maybe it will take a number of months to track down all of the problems, but keep that running balance of issues up to date.

Update Forecasts and Send the Package Up to Management

Sometimes we get caught up in the trees and forget that one of our most important functions is to report to management. Management can not do their job without reliable, accurate and timely financials. So set your deadline and send those financials out to the readers. If you ran out of time to fix all of the identified issues, keep that running list going. Eventually you will get to everything.

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