2023 Guide for an effective and practical Fiscal Closing
The fiscal closing is a crucial process for all companies that usually invest time and resources in order to make it as effective, accurate and practical as possible. If you want to know how to perfect the execution without compromising results, you have to read this unmissable guide.
Table of results:
- What is fiscal closing and why is it so important for companies?
- What are the key steps in a fiscal closing?
- How to optimize the tax closing process to make it really effective?
During the tax closing process, companies often face several challenges and make mistakes that can have negative consequences. Some of the common challenges and mistakes to avoid are:
- Lack of organization
- Incorrect recording of financial transactions
- Lack of knowledge of tax laws
- Omission of deductions and tax benefits
- Failure to meet deadlines
- Lack of documentation supporting financial transactions and reported figures
- Poor or inaccurate review of calculations, reports and tax returns prior to filing.
The question that arises in the face of these challenges is: is there a way to perform a successful tax closing capable of avoiding these errors? Of course there is, and here we will tell you how with the help of artificial intelligence and machine learning you can optimize this operation 100%.
But first, to understand the importance of taking an intelligent solution, we will show you why it is so important to do the tax closing properly and what are the key steps of it, so that you can visualize all the error prone points. Let’s start!
What is fiscal closing and why is it so important for companies?
The fiscal closing is the process by which a company or individual taxpayer finalizes its financial and accounting year, preparing the necessary information to file the corresponding tax returns.
During this process, accounting records are reviewed and adjusted, the financial result for the period is calculated and the tax liability is determined. In addition, all documents and vouchers necessary to support the information reported in the tax returns are compiled.
It is usually carried out at the end of the entity’s fiscal year or at the end of a specific accounting period, depending on the regulations and accounting practices of each country.
It is a decisive procedure since through this exercise it is possible to ensure compliance with tax obligations and maintain proper financial management.
It is increasingly imperative that they are prepared and know the best practices to carry it out in an effective and practical way.
What are the key steps in a fiscal closing?
The key steps in a tax closing process are not the same for all companies as they depend on the type of tax regulations and accounting practices of each country or jurisdiction. However, these are the key steps common to all:
Step 1: Collection of information from account statements, invoices, receipts, transaction records, payroll, among others.
Step 2: Reconciliation of accounts to ensure that book and bank balances match, as well as reconciling other relevant accounts, accounts receivable and accounts payable.
Step 3: Accounting adjustments, necessary to accurately reflect income, expenses, assets and liabilities for the fiscal period, as well as provisions for expenses, depreciation of assets, calculation of deferred taxes, etc.
Step 4: Calculation of the financial result, with the profit or loss obtained, according to the difference between total expenses and total revenues, taking into account the accounting adjustments made.
Step 5: Calculation of the tax liability based on the financial result and the applicable tax laws, applying the corresponding tax rates and considering the relevant tax deductions and benefits.
Step 6: Preparation of tax returns as required by the tax authorities, which may include income tax returns, value added tax (VAT), among others, depending on the jurisdiction and type of taxpayer.
Step 7: Thorough internal review and audit of calculations, reports and tax returns prior to filing to identify possible errors.
Step 8: Filing returns, completing the required forms and submitting them electronically or in physical format, depending on local regulations.
Step 9: Archiving and preservation of documents to facilitate future audits and tax consultations.
Although these steps represent an overview of the tax process, it is possible to visualize how many error-prone moments make this exercise a real challenge, as we discussed at the beginning of this blog post.
Once again the same question arises, is there a way to optimize this process? Let’s not delay this answer any longer, which, in particular, is the great value of this guide.
How to optimize the tax closing process to make it really effective?
The answer is simple and common to all countries in the world and their different regulations: the way to optimize the tax closing process is through the use of technologies such as artificial intelligence, machine learning and RPA (Robotic Process Automation).
These technologies make it possible to perform in seconds processes that usually take days, or even weeks, acquiring the necessary information from multiple sources, carrying out the reconciliations and issuing the reports as each country or jurisdiction requires them.
During this last time, artificial intelligence has been introduced in the processes of most industries to achieve certain objectives in an agile and efficient way, which is why it has become an unavoidable solution.
But how does one make use of this tool in a concrete way?
There are more and more software that provide specific solutions for complex processes such as fiscal closing. Logically, companies take this type of offers that, in principle, add value, but over time they lose validity, become outdated or fail to respond comprehensively to the challenges of an effective tax closing, which, as we have seen, has multiple instances to be solved.
As a result, there is an accumulation of independent solutions that employees themselves do not know how to use. The solution, AI or no AI, ends up being obsolete.
However, there is a comprehensive solution that not only makes use of artificial intelligence, but also machine learning and robotic process automation.
Conciliac EDM is the platform that integrates all solutions in one place and through which it is possible to make a Data Match to reconcile millions of records in seconds, create thousands of automated matching scenarios and all through a flexible and easy to use user interface.
With RPA, the ability to optimize is even greater because, once a process has been learned, it is possible to schedule the actions following instructions to know where to take the data sources from and what process to run, so that it performs this routine automatically and without the need for a person to intervene in its execution.
For its part, the Data Recon module intervenes here to handle unlimited financial reconciliation scenarios and specifying the reconciliations.
Best of all, with minimal learning of the platform, companies can automate and robotize the consolidation, reconciliation and matching of financial data, managing integrations (APIs, ERPs, DBs and more), as well as extracting data from PDF, XLS, CSV and TXT files.
You will be able to do this autonomously and independently, creating your own scenarios and rules according to the management needs your company requires, and leaving the people who previously spent a lot of time on this task to take care of other important actions, such as, for example, taking advantage of the visualization of the fiscal closing to make smarter and more profitable decisions.
Do you want to know in detail the Conciliac EDM platform? Request a free demo now.