An accountant can provide an accurate picture of a company’s performance and financial position for the year if the documents, business information and management decisions required for the year-end closing are made available on time.

With a few simple steps, management can help ensure that the year-end closing runs smoothly and that there are no unresolved items when the financial statements are prepared.

Providing missing documents

Before the year-end closing, it is worth checking that all invoices, bank and cash documents, certificates of completion, documents relating to advance payments and other supporting documents relating to the financial year have been submitted to the accounting team.

It is particularly important to notify the accountant of transactions that were completed by year-end but for which the invoice will only arrive later. The same applies to year-end bonuses, commissions, service fees and other liabilities that relate to the financial year but have not yet been invoiced.

Reviewing contracts and agreements can also be useful, as these may indicate financial obligations relating to the year-end or the following period.

Reconciling receivables and payables

Before the closing process, it is advisable to review outstanding receivables and payables, particularly balances that have remained unsettled for a longer period.

The accountant should be informed, for example, if the collection of a receivable has become uncertain, a customer disputes an invoice, or the amount, legal basis or settlement of a supplier liability has not yet been clarified. Such matters may have accounting implications when preparing the financial statements, including the potential need to recognise an impairment loss.

Preparing for the inventory count

The balances of assets and liabilities presented in the financial statements must be supported by an appropriate inventory record. The Hungarian Accounting Act (Act C of 2000) sets out detailed requirements concerning inventory procedures and accounting records.

Management should therefore agree on the inventory process in advance and inform the accounting team if, for example, there are damaged or unused assets, items awaiting disposal, assets stored at another site or at a third party’s premises, or discrepancies in inventory.

For fixed assets, it is also worth checking whether assets purchased, sold or placed into service during the year are properly reflected in the accounting records.

Reviewing items affecting the year-end cut-off

When closing the accounts, the decisive factor is not always when an invoice was issued or paid. It is also necessary to determine which financial year the relevant income or expense relates to.

Management should therefore notify the accounting team in advance of, for example, prepaid rent or insurance premiums, services covering multiple periods, work completed by year-end but invoiced later, as well as income received in advance or not yet invoiced.

The appropriate accounting treatment is determined by the accounting team based on contracts, completion information and other supporting documents. Management’s key responsibility is therefore to provide timely information about these transactions.

Reporting significant liabilities and risks

Preparing the financial statements requires more than information about transactions that have already been recorded in the accounts. Management should also inform the accountant of significant events and circumstances that may affect the company’s financial position.

These may include an ongoing or anticipated legal dispute, warranty obligations, significant contractual commitments, damage or loss events, or other agreements that could result in a payment obligation for the company.

Such matters do not necessarily appear automatically in the accounting records. The accountant can therefore only assess their appropriate accounting treatment if the necessary business information is available.

Agreeing on the closing schedule in advance

The closing process can be significantly easier if management and the accounting team agree on responsibilities and deadlines in advance. It is worth establishing when missing documents must be submitted, who is responsible for collecting specific information, and when the accounting records are expected to be closed and the financial statements prepared.

• If the company is subject to a statutory audit, documents and reconciliations requested by the auditor should also be taken into account from the beginning of the process. For companies belonging to international groups, reporting deadlines set by the parent company or the group should likewise be coordinated with the local closing process.

The deadline for filing and publishing the financial statements should also be taken into consideration. For companies whose financial year corresponds to the calendar year, the annual financial statements generally must be filed and published by 31 May of the following year. Electronic filing is carried out through the Online Reporting and Form-Filling System (OBR).

The closing process also prepares the company for the year ahead

Year-end closing is not merely an administrative task to be completed. The process can also highlight recurring issues, such as receivables that regularly remain outstanding, documents that consistently reach the accounting team late, or financial processes that repeatedly require reconciliation.

These lessons can be used when developing processes for the following financial year. A well-prepared closing process therefore not only makes the preparation of the financial statements more efficient, but can also make the company’s financial processes more transparent.

PKF Hungary’s accounting and financial reporting services cover monthly and annual closing, preparation of financial statements and group-level reporting.