Accounting process: the 7 steps of the accounting cycle for businesses
Document collection, posting, matching, review, declarations, closing and reporting: the 7 steps of the accounting cycle with roles, tools and best practices for 2026.
Expert note: This article was written by our chartered accountancy firm. Information is current as of 2026. For a personalised review of your situation, contact us.
Quick answer: what are the steps of the accounting process?#
The accounting process runs through seven steps: collecting source documents, qualifying and approving them, double-entry posting, matching and bank reconciliation, review and coherence checks, tax and social declarations, then year-end closing and reporting. The French Commercial Code (art. L123-12) requires chronological recording of transactions and an inventory at least once every twelve months.
The quality of a company's accounts depends less on the software used than on the robustness of the accounting process feeding that software. A poorly structured process accumulates invisible errors that emerge brutally at year-end, or worse, during a tax audit. This guide details the 7 steps of the accounting cycle, responsibilities at each step, and the indicators that measure your organisation's accounting maturity.
Why the accounting cycle is a management issue, not just a technical one#
The French Commercial Code (articles L123-12 to L123-14) requires every person or entity with commercial status to record the transactions affecting its assets and liabilities, those transactions being recorded chronologically (art. L123-12). This legal obligation is paired with a quality requirement: entries must be supported by dated source documents, kept in a defined order (PCG, art. 1032-2).
The General Chart of Accounts (PCG), updated by the Accounting Standards Authority (ANC), specifies the recording rules, account definitions and valuation methods to apply. A deficient accounting cycle exposes the company to three major risks: inaccurate financial statements that distort management decisions, rejection of accounts during a tax audit (with a reconstruction of turnover by the tax authorities), and excessive closing timelines that erode the confidence of financial partners.
What the law and the PCG actually require, text by text#
| Text | What it requires |
|---|---|
| Commercial Code, art. L123-12 | chronological recording of the transactions affecting the company's assets and liabilities, an inventory at least once every twelve months, annual accounts (balance sheet, income statement, notes) forming an indivisible whole |
| Commercial Code, art. L123-13 | the balance sheet describes assets and liabilities separately; the income statement summarises the income and expenses of the period, irrespective of their collection or payment date |
| Commercial Code, art. L123-14 | accounts that are compliant and honest, and give a true and fair view |
| PCG, art. 1031-1 | double entry: every debit corresponds to a credit of the same amount |
| PCG, art. 1031-2 and 1031-3 | recording of transactions in the general journal, then a validation procedure that prohibits any amendment or deletion of the entry |
| PCG, art. 1031-4 | a closing procedure that freezes the chronology and guarantees the integrity of the entries |
| PCG, art. 1032-2 | every entry is supported by a dated source document, filed in a defined order |
The 7 steps of the accounting cycle#
Step 1: collection and centralisation of source documents#
Everything starts with the documents: supplier invoices, client invoices, bank statements, expense claims, contracts, payslips. In 2026, collection takes place through three main channels:
- Electronic routes: invoices received by email or via an approved platform (PA, formerly PDP), integrated directly into the accounting software
- Mobile capture: photos of paper documents (expense receipts, tickets) via a dedicated app (Dext, Pennylane)
- Automatic import: automated bank feeds via banking API connections (PSD2)
Collection discipline is the primary quality factor in accounting. A missing document at month-end generates a provisional entry, a manual review and potentially lost recoverable VAT. Target: 95% of documents available before the 5th of the following month.
Step 2: qualification and validation of documents#
Before posting, each document must be qualified: nature of the expense or revenue, analytical allocation if required, applicable VAT rate, period of attribution. In companies, this step typically involves an approval workflow: a department manager approves supplier invoices before the accounting team integrates them.
The absence of a validation circuit is a frequent source of unsupported entries: expenses posted without management approval, or expense claims reimbursed without verification of their business nature.
Step 3: posting and accounting entry#
Posting consists of recording each transaction in the appropriate journal (purchase journal, sales journal, bank journal, miscellaneous journal) in accordance with the double-entry principle: every debit corresponds to a credit of the same amount.
In 2026, manual posting is declining thanks to OCR and automatic imports. But software systems make allocation errors, particularly on expenses to be capitalised, advances on works or inter-company transactions. Systematic control of automatic allocations remains essential.
Posting must respect the strict chronological order required by the PCG: entries are recorded in the order of their transaction date, with no possibility of deleting or modifying a validated entry (audit trail).
Step 4: matching and bank reconciliation#
Matching (lettrage) consists of associating each third-party entry (client or supplier) with the corresponding payment. A €1,200 supplier invoice is matched with the €1,200 bank transfer posted in the bank account. Unmatched entries represent either unpaid items or posting errors.
Bank reconciliation is the process by which the balance of the bank account in the accounting system is verified against the balance of the bank statement, adjusted for in-transit items. Monthly reconciliation is the minimum; weekly frequency is recommended for entities with high transaction volumes.
In practice, the most frequent reconciliation gaps come from: issued cheques not yet debited, received transfers not yet identified, unrecorded bank charges, returned direct debit notifications.
Step 5: review and coherence checks#
Accounting review is the quality control step of the cycle. It aims to verify:
- Balance coherence: an abnormal supplier credit balance, a negative client balance, a cost that doubles without explanation, all are warning signals
- Period entry completeness: accruals (invoices not yet received), revenue accruals, regularisation of rents and subscriptions
- Correct VAT application: rates, taxable event (debit or cash basis depending on the VAT regime), VAT on advance payments
- Compliance with accruals principle: expenses and revenues are allocated to their period of realisation (French Commercial Code, art. L123-13, second paragraph, and art. L123-21)
The standard IFRS 15 (revenue from contracts with customers), mandatory for the consolidated accounts of companies whose securities are admitted to trading on an EU regulated market (Regulation EC 1606/2002) and optional for other consolidating groups, requires an additional review on revenue recognition: turnover is recorded when (and only when) the performance obligation is satisfied.
Step 6: preparation of tax and social declarations#
At regular intervals, the accounting cycle feeds the mandatory declarations:
- VAT: monthly or quarterly CA3 return, filed between the 15th and the 24th of the following month depending on the category of taxpayer
- Corporate income tax (IS): quarterly instalments (15 March, 15 June, 15 September, 15 December), balance payable by the 15th of the fourth month following year-end, i.e. 15 May for a 31 December year-end (form 2572)
- DSN (social declaration): monthly, by the 5th of the following month for employers with at least 50 employees whose payroll is paid within the same month as the work period, by the 15th in all other cases
- DAS2 (fees declaration): filed during January of the year following payment, or, by way of derogation, together with the annual tax return
Each declaration must be reconciled with the accounts before submission. A discrepancy between the VAT collected in the accounts and the VAT declared is a major risk point during a tax audit.
Step 7: year-end closing and reporting#
The year-end close is the final step of the annual cycle. It includes:
- Inventory entries: depreciation, provisions, stock movement, regularisations (prepaid expenses and revenues, accruals)
- Determination of the result: transfer of the profit and loss account to the balance sheet
- Preparation of financial statements: balance sheet, income statement, cash flow statement, notes
- Legal filing of accounts with the commercial court registry, within one month of their approval by the shareholders' meeting, or within two months where the filing is made electronically (French Commercial Code, art. L232-21 and L232-23), the approval meeting itself being held within six months of year-end
The reporting encompasses all documents produced at year-end: annual accounts, tax return, financial dashboards, management report. The quality of the output directly reflects the quality of the process upstream.
Filing calendar fed by the cycle#
| Obligation | Frequency | Deadline | Legal basis |
|---|---|---|---|
| VAT (CA3 return) | monthly or quarterly | between the 15th and the 24th of the following month depending on the category of taxpayer | Tax Code, annex IV, art. 39 |
| Corporate income tax, instalments | quarterly | 15 March, 15 June, 15 September, 15 December | Tax Code, art. 1668, 1 |
| Corporate income tax, balance (form 2572) | annual | the 15th of the fourth month following year-end, i.e. 15 May for a 31 December year-end | Tax Code, art. 1668, 2 |
| DSN (social declaration) | monthly | the 5th of the following month (at least 50 employees and payroll paid within the month of the work period), the 15th in all other cases | Social Security Code, art. R243-6 |
| DAS2 (fees declaration) | annual | during January of the year following payment, or together with the annual tax return | Tax Code, annex III, art. 344 I-0 bis |
| Filing of accounts with the court registry | annual | 1 month after approval by the shareholders' meeting, 2 months where filed electronically | Commercial Code, art. L232-21 and L232-23 |
Accounting process maturity indicators#
A high-performing accounting process is measured by:
| Indicator | Mature target | Warning signal |
|---|---|---|
| Monthly closing lead time | Day 5 to Day 7 | More than Day 15 |
| Missing document rate | Less than 5% | More than 15% |
| Bank reconciliation gaps | Zero at month-end | Recurring gaps |
| Tax return filing lead time | Before deadline | Systematic extensions |
| Entries pending justification | Less than 2% | More than 10% |
Hayot Expertise advice: accounting reliability is primarily a matter of organisational stability. Good journal entries are usually the product of a well-run process, not the reverse. Before investing in a new tool, audit your current cycle: the fastest gains almost always come from better collection discipline and a clearly defined validation circuit.
See also accounting follow-up, accounting digitalisation and reversing entries.
Three recurring questions about running the cycle#
Can a validated entry still be corrected?+
Not by amending it. The PCG (art. 1031-3) requires a validation procedure that prohibits any amendment or deletion of the entry. Corrections are made through a reversing entry: the original entry remains visible and the audit trail is preserved. The closing procedure (art. 1031-4) then freezes the chronology and guarantees the integrity of the entries.
What actually happens if the accounts are rejected during a tax audit?+
The tax authorities reconstruct turnover, in principle under the adversarial rectification procedure. Assessment on an ex-officio basis applies only in the cases exhaustively listed in articles L65 to L74 of the Book of Tax Procedures (failure to file or late filing, obstruction of a tax audit). A rejection of the accounts does not automatically trigger an ex-officio assessment.
Does electronic invoicing change the accounting process?+
It changes the input channel, not the structure. Electronic invoicing is not governed by the PCG but by the tax framework: invoices transit through an approved platform (PA, formerly PDP) and the obligations roll out from 1 September 2026. The seven steps remain the same, collection becomes more automated, and allocation checks still have to be performed.
Want to redesign your accounting cycle from end to end?#
We can audit your current process, identify the risk steps and support you in implementing a reliable, measurable accounting cycle.
Discover our accounting advisory support
Frequently asked questions
What are the mandatory steps in the accounting process under French law?+
The French Commercial Code (art. L123-12 to L123-14) requires chronological recording of all transactions, an annual inventory, and the production of annual accounts (balance sheet, income statement, notes). The PCG specifies the recording and valuation rules. These obligations apply to all commercial entities, whether sole traders or companies.
What is the difference between a monthly and annual accounting cycle?+
The monthly cycle includes document collection, posting, bank reconciliation, matching and tax declarations (VAT, DSN). The annual cycle adds inventory entries, provisions, depreciation and the production of annual accounts filed with the commercial court registry. The two cycles overlap: a solid monthly process makes the year-end close considerably easier.
How long should the monthly close take for an SME?+
A well-organised SME using a cloud accounting tool and a digital collection workflow should close its monthly accounts between Day 5 and Day 7. Beyond Day 15, it signals friction points that need correcting: late collection, missing approvals or non-automated bank reconciliations.
When should a business call in a chartered accountant to improve its accounting process?+
When monthly accounts are consistently late, reconciliation gaps accumulate, or tax return preparation generates more than two weeks of intensive work. A chartered accountant can audit the cycle in one to two days and propose a concrete improvement plan.
When must annual accounts be filed with the commercial court registry?+
Accounts are filed within one month of their approval by the shareholders' meeting, or within two months where the filing is made electronically (French Commercial Code, art. L232-21 for SARL and art. L232-23 for joint-stock companies). The approval meeting itself must be held within six months of year-end (art. L223-26 for SARL, art. L225-100 for SA). The deadline is therefore the same for SA, SAS and SARL: there is no 6-month regime for some and 7-month regime for others.
Article written by Samuel HAYOT
Chartered Accountant, registered with the Institute of Chartered Accountants. Certified Pennylane trainer.
Regulated French accounting and audit firm based in Paris 8, built to support companies across France with a digital and decision-oriented approach.
Sources
Official and operational sources cited for this page.
This topic is part of our service Fractional CFO Paris for startups and SMEs
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