Tips for Making the Holidays Happier for A/E Firm Accountants

The exclamation “Happy Holidays!” typically rings a little hollow for architecture and engineering (A/E) firm accountants. Instead of being fun and festive, the end of the calendar year is one of their busiest times (along with tax season), as they scramble to complete a variety of tasks around things like employees wanting to buy into firm ownership, year-end bonuses, etc.

However, there are ways that A/E firm accounting departments can complete those tasks without all of the usual stress. 

“We Need Numbers!” Why the Pressure Is So Intense at End-of-Year. 

It doesn’t matter if your firm is small or large, end-of-year tends to be stressful for accountants. Small firms have simpler finances, but also fewer resources dedicated to financial management. Large firms have bigger accounting departments but they’re faced with more complex challenges. So, there’s lots of pressure at this time of year.

For example, there are valuation formulas and ownership transition activities that rely on the books being closed for the year in a timely manner. People who’ve been told they can buy into the firm as soon as a valuation is determined can become very frustrated very quickly if the accounting department doesn’t produce the needed figures promptly.

So, what can an A/E firm accountant do to minimize their stress and maximize their enjoyment of the season? We advise them to take three important steps.

1. Estimate the second half of December and generate invoices early.

The goal of getting all of December’s time properly recorded and invoices processed and out to clients by the end of the year or very early in January is a major stressor. That’s especially true since time off around the holidays complicates things.

We recommend that—with cooperation from their clients—firms cut off their billing cycle early in December, provide clients with what they believe will be the full invoice for the month based on anticipated billings for the second half of it, and then use the January invoice to make any corrections needed to true things up across December and January.

This “Pro Tip” is easier to use than it might seem since workflow tends to drop off pretty significantly near the end of the year. Consequently, the amount of actual project time that has to be accounted for after the first of the year is relatively small. Accountants just need to plan ahead, talk with project managers and principals about this approach to billing for December, and let them know that invoices will be produced before Christmas and should be reviewed, approved, and returned as soon as possible.  

2.  Provide bonuses based on what you know by December 1.

Year-end bonuses are another important issue for firms, including how they affect the firm’s overall cash position. Questions like, “How much cash do we have?” and “How much should bonuses be to reward people properly and limit our taxable income?” are top-of-mind for accountants and principals as the end of the year approaches.

We advise firms that they don’t have to wait until the end of December to make these decisions. November invoices (sent in early December) and December invoices (sent in mid-December, as described above) probably will not be paid by the end of the year. So, a firm’s total revenue received for the year likely will be through the October invoices.

That means that as of December 1, your cash balance and anticipated expenses are essentially locked in. And that means you can make your decisions about discretionary expenses and your desired taxable income level at that time—including both smaller gift amounts for employees and larger bonuses for owners and senior managers. Plus, there are other cash management strategies, like prepaying expenses, that can be used throughout December as needed.

3. If you usually get outside assistance on closing your books, do it now rather than after the first of the year.

A/E firm accountants often get guidance and assistance on closing their books from an outside accounting firm in January or February in advance of the March 15 corporate tax deadline. We recommend that they begin this collaboration well before the end of the year instead.

Dealing with things like adjusting entries for depreciation, etc., now gives your outside accountant a “running start” on your taxes. Consequently, you’ll have the numbers you need for year-end valuation and other purposes much earlier next year than if you ask for their help in March. The belief that, “We can only bring the outside accountant in after we’ve done all of our accounting work,” is common but not true.

Looking Ahead to Truly Happy Holidays!

Yes, A/E firm accountant… Your holiday season can be more fun and less stressful.

If you’re using an industry-specific software package to help you manage your finances more effectively throughout the year, you develop a process for generating December invoices halfway through the month, and you start working with an outside accountant now, you can be drinking eggnog and singing carols with the rest of your officemates rather than sitting quietly as visions of deadlines and obligations dance in your head!