Common Mistakes to Avoid with Year-End Financial Statements

Anyone that has ever worked with year-end financial statements knows that a thorough review to ensure accuracy and accountability is vital. With so many items and numbers to scour, it’s a daunting and overwhelming task. But, to help with the year-end financial report blues, we’ve compiled a list of the most common mistakes found on financial statements so you can know what to look for ahead of time.

Overlooked Expense Line Items

Sometimes, even large expenditures can be overlooked. These expenses can include everything from salaries and benefits, costs to provide services, to office supplies and other operating expenses. A quick once-over and comparison to estimated expenses on the budget can help guarantee that an expense has not been miscategorized. The same rings true for assets and income.

Misclassified Assets and Liabilities

Since assets and liabilities fall into different categories, misclassification of these can severely alter the financial picture. There are current liabilities, long-term liabilities, current assets, and long-term assets. It’s easy to accidentally record a long-term liability into a current liability column, which would suggest that the liability has debt attached to it that needs to be repaid.

Pending Transaction Procedures

Make sure everyone “closes the books” at the same time and that accruals and deferred income/expenses are dealt with the same way across all departments. Informing everyone who touches the accounting, billing, or payroll of whether your agency is on a “cash basis” or “accrual basis” is important to maintain accuracy and consistency on your year-end reports.

Properly Securing the Books

To prevent a transaction in the new year from affecting the previous year’s books, it is important to preserve the finalized balance and, if possible, lock those items into place so that an expense from the current year does not accidentally get booked in the previous year. Black Mountain Software has a built-in feature that closes the months of prior fiscal years to prevent unintended entries.

Reviewing year-end financial reports is not only good practice, it also helps guarantee accuracy for future financial reports and future budgeting. A quick once-over and examination of any items that look over- or understated can make a big difference in the long run.

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