Foreign-owned companies in Indonesia should complete a month-end accounting close to verify their financial records, identify outstanding liabilities, and prepare accurate financial statements for management and overseas shareholders.
Although Indonesia does not impose a universal statutory deadline for completing an internal month-end close, PT PMAs must still meet applicable tax payment, filing, and recordkeeping obligations.
Reconcile bank accounts and cash balances
The month-end close typically begins with reconciling transactions recorded in the accounting system against bank statements, including those for foreign-currency accounts.
Differences may arise from outstanding payments, bank charges, or transactions that have not been recorded. Petty cash and other cash balances should also be reconciled.
Review revenue, expenses, and outstanding invoices
Once cash balances have been checked, finance teams should review sales, purchases, and outstanding invoices to confirm that transactions have been recorded in the correct accounting period.
This includes:
- Verifying sales and purchase invoices against accounting records.
- Reconciling accounts receivable and payable against customer and supplier records.
- Recording accrued expenses and allocating prepaid costs to the appropriate periods.
- Reviewing overdue customer invoices and outstanding supplier balances.
For instance, if a PT PMA receives consulting services in September but the supplier issues its invoice in October, the company may need to recognize the expense in September through an accrual.
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Invoices or other transactions identified after month-end should also be reviewed to determine whether they require adjustments to the reporting period before the accounts are finalized.
Outstanding receivables should be assessed for expected credit losses under the applicable accounting standards, including amounts that are not yet overdue.
Reconcile payroll and employee-related liabilities
Payroll expenses recorded in the general ledger should match the company’s payroll calculations and supporting records. Finance teams should verify salaries, allowances, bonuses, overtime, and other employee payments against the payroll register.
The review should also cover:
- Employee income tax (PPh 21) deductions and related liabilities.
- BPJS Kesehatan and BPJS Ketenagakerjaan contributions.
- Outstanding salary payments and employee reimbursements.
- Accrued bonuses, leave-related liabilities, and other employee benefits, where applicable.
For foreign employees, companies should verify the treatment of remuneration and applicable payroll obligations based on their employment arrangements.
Certain employee benefits may require accounting provisions, depending on the nature of the benefit and applicable Indonesian financial accounting standards.
Review monthly tax transactions and liabilities
Once payroll and other operating transactions have been recorded, the company should reconcile its accounting records against applicable monthly tax calculations, payments, and filings.
The review should cover:
- Value-added tax (VAT): Companies registered as taxable entrepreneurs (PKP) should reconcile input and output VAT against tax invoices and accounting records.
- PPh 21: Verify employee income tax calculations and withholding.
- PPh 23: Review withholding tax on applicable domestic service payments and other qualifying transactions.
- PPh 26: Check withholding tax on applicable payments to non-residents, including any available tax treaty relief.
- PPh 25: Verify monthly corporate income tax installments, where applicable.
Any applicable final income taxes and other transaction-specific withholding obligations should also be reviewed.
Differences between general ledger balances and tax records should be investigated before the relevant filings are finalized.
Monthly tax payment and filing deadlines are separate from the company’s internal accounting close and vary depending on the tax obligation.
Reconcile fixed assets, inventory, and other balance sheet accounts
Fixed asset records should reflect purchases, disposals, and depreciation during the reporting period. Finance teams should also check whether expenditure has been correctly classified as a fixed asset or operating expense.
Companies holding inventory should reconcile stock records against accounting balances and investigate material differences. Physical counts may be conducted periodically, supported by inventory controls between counts.
Other balances requiring review include:
- Advances to employees and suppliers.
- Security deposits and prepaid expenses.
- Outstanding liabilities and other accruals.
- Inventory or assets that may require impairment adjustments.
Companies with bank loans or other external financing should also reconcile outstanding principal, accrued interest, and repayments against lender statements and loan agreements.
Material balances should be supported by records that can be reviewed during management reporting or a financial audit.
Review intercompany transactions and foreign-currency balances
Shareholder loans, management fees, royalties, and other related-party charges should be reconciled against intercompany statements. Finance teams should investigate differences in recorded amounts, transaction dates, and outstanding balances.
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Under Indonesian financial accounting standards, foreign-currency monetary balances, including loans and receivables, are generally translated using the closing exchange rate at the reporting date.
Non-monetary items recorded at historical cost generally use the exchange rate on the transaction date, while those measured at fair value use the exchange rate applicable when that fair value was determined.
Indonesian tax bookkeeping generally uses Rupiah and Indonesian. Eligible companies may use English and US dollars if they meet the applicable approval or notification requirements.
Where overseas parent companies apply different accounting policies or reporting currencies, additional adjustments may be necessary for group consolidation.
However, intercompany reconciliation does not establish compliance with Indonesian transfer pricing requirements. Related-party charges may require separate supporting documentation and tax analysis.
Prepare and review monthly financial statements
After completing the account reconciliations, finance teams should review the adjusted trial balance to identify unusual account balances, incorrect classifications, or missing journal entries.
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Once the necessary adjustments have been recorded, the company can prepare its monthly profit and loss statement and balance sheet, supported by cash flow information where required for management reporting.
Management should compare the results against previous periods and approved budgets, focusing on material changes such as:
- Revenue declining while outstanding receivables increase.
- Operating expenses exceeding budget.
- Cash balances falling despite reported profits.
- Significant movements in inventory, receivables, or supplier liabilities.
Unusual movements should be investigated before management approves the results.
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