Accounting process: the 7 steps of the accounting cycle for businesses

Updated April 2026 - 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.

The French Commercial Code (articles L123-12 to L123-14) requires every commercial entity to record all transactions chronologically affecting its assets and liabilities. This legal obligation is paired with a quality requirement: entries must be supported by dated source documents, kept in a defined order.

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 ex-officio assessment), and excessive closing timelines that erode the confidence of financial partners.

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 a certified PDP platform, integrated directly into the accounting software
• ▸Mobile capture: photos of paper documents (expense receipts, tickets) via a dedicated app (Dext, Pennylane)
• ▸Automatic import: real-time bank feeds via 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

The standard IFRS 15 (revenue from contracts with customers), applicable to consolidated 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 (by the 15th-19th of the following month)
• ▸Corporate income tax (IS): quarterly instalments (15 March, 15 June, 15 September, 15 December), balance payment within 3 months and 15 days after year-end
• ▸DSN (social declaration): monthly, by the 5th or 15th of the following month depending on company size
• ▸DAS2 (fees declaration): annual, by 30 April

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:

1. ▸Inventory entries: depreciation, provisions, stock movement, regularisations (prepaid expenses and revenues, accruals)
2. ▸Determination of the result: transfer of the profit and loss account to the balance sheet
3. ▸Preparation of financial statements: balance sheet, income statement, cash flow statement, notes
4. ▸Legal filing of accounts with the commercial court registry (within 6 months after closing for SA and SAS, 7 months for SARL)

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.

A high-performing accounting process is measured by:

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.

We can audit your current process, identify the risk steps and support you in implementing a reliable, measurable accounting cycle.

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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, typically with visible ROI within three months.