A Year End Close Checklist for Busy Accountants

When your fiscal year is coming to an end, it is important to know ahead of time which tasks you need to complete in order to work as efficiently as possible. According to Industry Dive, it takes companies an average of 25 days to complete year-end close procedures (with companies in the 75th percentile taking an average of 15 days and companies in the 25th percentile taking an average of 45 days). 

“Year End Closing” written on a sticky note next to a December calendar

For companies lagging behind, the financial cost of taking an extra 20 days to close their books can be steep, and for companies performing on par with the industry, the financial benefit of reducing their work by 10 days can be a huge advantage.

​With year-end close coinciding with month-end and quarter-end close, time is not something that accounting staff can afford to waste. ​Thankfully, organizations that have an accounting policies and procedures manual, will typically have these activities detailed out to make it easy for accounting and bookkeeping personnel to follow.

​However, for companies that do not yet have formalized policies, month-end and year-end close periods can be times of scrambling to prepare reports and reconcile accounts with resources that may or may not be readily available. Additionally, companies that have experienced significant accounting changes (like changing accounting software or switching accounting methods) may find that their previous close to-do lists need to be updated to reflect added work that must be done. Either can result in major headaches and drag out the close process, costing more time and tying up accounting personnel that has other important activities to complete as well like AP, AR, and payroll.

When you are preparing for year-end, use this simple accounting close checklist to ensure you don’t miss anything:

Develop a Closing Schedule

• Create a schedule of important dates related to close procedures
• Include preparation activities (ex. deadlines for employees to submit reimbursement requests) on the schedule to keep everyone on the same page.
• Highlight critical deadlines for taxes and compliance activities to ensure they will not be missed.

Send Invoices

• Create invoices for any services rendered or orders placed that have not yet been billed.
• Send all unset invoices and follow up on outstanding invoices with reminders.
• Collect on past due invoices by renegotiating payment terms or establishing a payment plan with customers.
• Hand off well past due invoices to a collection agency, where appropriate, to try to recoup at least some part of the balance owed.

Pay Outstanding Bills

• Record and categorize expenses that have not yet been recorded.
• Pay any outstanding bills to vendors and suppliers per their payment terms.
• Pay contractors and run payroll according to your pay schedule.  

Organize Receipts

• Gather all outstanding receipts and organize them by date or expense account (or review your receipt capture software to ensure all receipts are accounted for digitally).
• Remember to always keep personal and business expenses separate.
• Have employees submit mileage logs and other travel-related receipts for reimbursement.
• Determine which business expenses are tax deductible.

Check Inventory

• Conduct an audit to ensure inventory counts match physical stock and investigate any discrepancies. (If you do not have the personnel to do your own physical asset audit, bring in an external auditor to do this work for your team.)
• Utilize this current inventory information to better inform purchasing decisions next year.

Reconcile Accounts

• Check bank and credit card account statements to match recorded transactions with money movement.
• Lean on previous reconciliations to speed up the process. (Ideally, companies will perform monthly bank and credit reconciliations so that at the end of the year they only have to reconcile the previous month’s transactions. For businesses with high volumes of transactions, reconciliations may need to be done even more frequently, like weekly or daily.)
• Adjust records as needed where errors are discovered.

Reconcile AR & AP

• Compare cash inflows and outflows with accounts payables and accounts receivables and identify any mismatches.
• If you have outstanding invoices, make corresponding journal entries on your income statement and balance sheet for next year.
• List outstanding debts as accrued expenses on next year’s balance sheet.

Depreciate Fixed Assets

• Update fixed asset totals with any new fixed assets that were acquired.
• Reduce the value of fixed assets according to their respective depreciation schedules and write off fully depreciated assets.

Handle Grants Correctly

• Account for grants received from the government according to their unique payback terms.

Verify Employee and Contractor Information

• Ensure employees and contractors are properly categorized for tax purposes.
• Obtain any missing forms from workers to ensure they are being properly reported (W-4s and W-9s) and avoid tax filing delays.
• Confirm workers’ contact information for sending employment forms (W-2s and 1099s).

Confirm Payroll Taxes

• If employee bonuses are going to be paid, set aside tax withholdings for them now.
• Match payroll tax liabilities and payroll statements for the year to avoid underpaying employee payroll taxes.

Prepare Reports & Financial Statements

• Run regular reports and prepare key financial statements such as the balance sheet, income statement/P&L statement, and cash flow statement.
• Analyze reports and calculate key metrics (profit margin, current ratio, total debt ratio, etc.) to present to leadership.
• Look for any unusual numbers or outliers that may require further analysis.

Backup Information

• Keep year-end close documents and resources in one location and back them up both locally and in the cloud to protect against loss of data. 
• Share financial information securely with leadership and anyone else who needs access to it.
• If your accounting software allows it, lock the close period so changes cannot be made once you are done.

Get Organized for Next Year

• Create an accounting manual to make year-end close easier next year, especially if the company plans to hire new employees.
• Review vendor contracts and lender agreements to determine if they should be negotiated.

Set Goals

• Evaluate how you did this year compared to your business goals and determine what you hope to accomplish next year.
• Work cross-functionally to establish the future mission for the company and set appropriate goals for next year.

Evaluate Tax Strategies

• Do your research and consult with a tax professional or lawyer to determine whether there are tax strategies that your business can take advantage of to reduce its tax burden.

Develop Next Year’s Budget

• Compare your annual spend against the budget to make necessary adjustments for next year.
• Make sure to include planned expenses and upcoming asset outlays in the budget.
• Time purchases in accordance with your tax strategy.
• Utilize forecasting models to anticipate next year’s expenses and income.

​If you need help with closing your books, please reach out to us. We have a highly experienced team of bookkeepers and accountants to help you with month-end and year-end close activities as well as other short-term accounting engagements. We also offer part-time bookkeeping and accounting services for companies that need ongoing help. Contact us to find out more about how you can get the expertise you need and the flexibility you want!