Your Complete Year-End Accounting Close Checklist (2024)
Alexandre (Finance Director @ Upflow)
Jan 22, 2025
2024 is done and dusted, but before we can put a bow on it there’s a crucial task that needs to be completed - the dreaded year-end close. This daunting process ensures the accuracy and completeness of a company's financial data. Proper execution is key to informed decision-making and compliance with tax regulations.
In this article, we'll guide you through a comprehensive checklist to streamline your year-end accounting close, with real-world insights throughout from Upflow customers Vincent Hamel (Finance Director at Groupe Ricochet) and Margherita Vascotto (Head of Finance at Casavi).
Keep reading to find out:
What is the Year-End Accounting Close (and Why is it Needed)?
The year-end accounting close refers to the process of ensuring that all financial transactions are accurately recorded and summarized in financial statements for a fiscal year. This process is essential for various reasons:
Tax Compliance: Year-end accounts are vital for filing accurate tax returns.
Financial Analysis: Businesses rely on year-end statements to analyze performance and make strategic decisions.
Investor and Lender Requirements: Investors and lenders review these statements to evaluate the financial health of a business.
It involves reconciling accounts, identifying discrepancies, making adjustments, and preparing financial statements.
Additionally, the process often requires close collaboration across departments such as finance, operations, and IT.
Why is the Year-End Close So Complicated?
The complexity of the year-end close process stems from multiple factors:
Volume of transactions: Businesses must account for all financial activities throughout the year, a process that can involve thousands of transactions.
Compliance requirements: Adhering to tax laws and financial reporting standards means the process needs to be done methodically and carefully.
Attention to detail: Each line item on financial statements requires verification for accuracy, making the process time-consuming.
Documentation challenges: Missing or inaccurate records can cause delays during reconciliations, especially for growing businesses managing large volumes of data.
Audit pressures: Often, the need to ensure financial records are audit-ready within tight timeframes adds further pressure.
Why is a Year-End Accounting Checklist Important?
Given the inherent challenges, a checklist (like the one we’ve provided below) is crucial to maintaining order and efficiency. It provides:
Standardized processes: Outlining specific tasks, timelines, and responsibilities helps avoid delays.
Enhanced accuracy: Breaking down the process into manageable steps minimizes errors.
Audit and compliance readiness: Ensures financial records meet necessary standards and cover everything that’s needed when audit time comes around.
Stress reduction: A clear plan alleviates the stress of managing numerous tasks in a short timeframe.
Year-End Accounting Close Checklist
1. Create a Financial Close Schedule
A well-structured financial close schedule is a critical first step. This is where you plan out the timings of each step in the checklist below, the deadlines for each and the key stakeholders you’ll need inputs from. A clear schedule will help you ensure timely and accurate completion of year-end tasks and sets clear expectations for the team, helping prevent bottlenecks.
Margherita Vascotto, Head of Finance at Casavi, notes: “Two of the biggest challenges are missing inputs from colleagues regarding large accruals and missing invoice approvals. To overcome these you need to inform the team leaders beforehand, ensure they understand the importance of the process and set up automated reminders”.
As Vincent Hamel, Finance Director at Groupe Ricochet, puts it: “It’s important to give each member of the finance team their own responsibility with the year-end close and make sure that they are accountable for that part of the process."
Scheduling the close process also allows for better allocation of resources, ensuring that tasks are evenly distributed. For instance, accounting teams might handle reconciliation, while HR ensures payroll is processed.
Vincent shares how this process works at Groupe Ricochet: “The best way to prepare for year-end is to meet with key stakeholders and discuss not only quantitative elements but also qualitative aspects. For instance, a conversation with a warehouse manager might reveal that several pallets in the warehouse are damaged and in poor condition, which could lead to a significant inventory write-down impacting the financial statements.”
2. Gather Financial Documents
Accurate and complete financial records are essential to ensure all entries are accounted for and any discrepancies are addressed. This process often involves compiling various reports from internal systems, vendors, and financial institutions. Missing or incorrect documents could delay the closing process or lead to reporting errors.
For example, bank statements are vital for reconciling cash balances, while payroll reports ensure employee compensation is accurately recorded. Having all documents ready and organized also minimizes the risk of misreporting when creating financial statements.
3. Review Billing and Accounts Receivable
Reviewing billing and Accounts Receivable (AR) ensures that all earned revenue is captured before the period ends. Missing invoices or uncollected payments can significantly change the financial picture, especially when reviewing year-over-year performance. This is particularly relevant in industries with long billing cycles, like consulting or construction, where work may be completed in one fiscal year but invoicing can lag.
To ensure accuracy, compare sales records with bank receipts and payment histories, cross-checking for discrepancies. This review helps identify unpaid or overdue accounts, meaning you can action follow-ups with customers to ensure timely collection.
A proactive approach, such as auditing aged receivables on a monthly basis (or just regularly reviewing your analytics in Upflow), can prevent surprises at year-end.
Vincent, Finance Director at Groupe Ricochet makes a practice of proactively keeping on top of outstanding invoices: “We ask ourselves each month, do we have bad debt? It’s about keeping on top of it each month and not just at the end of year. It's the best way to go."
4. Reconcile Accounts Payable
Reconciliation of Accounts Payable (AP) ensures that the company’s obligations are accurately recorded and reflected in the financial statements. Similar to AR but on the other side of the coin, missing invoices or unpaid bills could lead to inaccurate accounts and an overstated profit.
For example, vendor bills might be delayed, or invoices could be missing, especially at year-end when suppliers are also closing their books. By checking email inboxes or AP/ spend management systems for unprocessed bills, you ensure all financial obligations are captured.
Timely follow-ups on unapproved vendor bills ensure that no liabilities are left unaccounted for.
As Margherita from Casavi puts it: “If you use a lot of accruals because vendors have not yet sent their invoices ( which is quite common as most people are off in the second half of December), you risk having to do more adjustments later on, hence increasing the workload.”
5. Reconcile Bank Statements
Reconciling bank statements helps ensure that your cash balances match what is recorded in your accounting system. This process can uncover errors such as unauthorized withdrawals, accounting mistakes, or timing differences (e.g., checks not yet cleared or deposits not yet recorded).
Using automated reconciliation tools can streamline this process, reducing manual entry and the chances of errors. The reconciliation process also provides an opportunity to review the overall liquidity position of the company, offering insights into cash flow and reserves that can influence strategic decisions.
6. Review Employee Expenses
Outstanding expense reports can also skew financial results, especially when it comes to tax reporting and reimbursements.
Ensuring that all employee expenses are submitted on time helps avoid issues at the end of the year. Reminding employees to submit reports several days in advance of every monthly close not only encourages compliance but also provides time to clarify any discrepancies.
For companies with significant travel or project-related expenses, regular monitoring can ensure these costs are captured correctly, especially for budgeting or forecasting purposes.
7. Record Payroll
Payroll impacts multiple accounts, including wages, tax liabilities, and benefit accruals. Failure to record these accurately can affect tax compliance and employee relations.
Make sure that all payroll data, including any bonuses or commissions, are entered correctly. For example, sales teams or other incentive-based employees might receive performance-related bonuses, which need to be calculated accurately.
Additionally, any vacation accruals must be tracked, as these are liabilities that may not be paid out immediately but must still be accounted for.
8. Adjust Revenue Accruals
Revenue recognition is a critical area for companies that deliver services or products before invoicing. This is especially important for businesses on long-term contracts or with irregular billing cycles. Properly adjusting deferred and unbilled revenues ensures that financial statements reflect all earned income, even if not invoiced.
For instance, companies with subscription-based services must adjust revenue for amounts earned but not billed by year-end. Ensuring accurate recognition of both deferred and unbilled revenue supports compliance with accounting standards such as GAAP or IFRS, which require proper timing of revenue recognition.
9. Count and Adjust Inventory (Depending On Business Type)
Inventory management is vital, especially for businesses in manufacturing, retail, or distribution. A physical inventory count ensures that book records match the actual goods on hand, and adjustments are made for lost, damaged, or obsolete inventory.
For example, in industries like food manufacturing, where items may have expiration dates, expired goods must be written off to ensure financial records reflect actual inventory value. Accurately adjusting inventory levels avoids overstating assets and can prevent stock discrepancies from affecting cash flow or tax reporting.
10. Review and Update Fixed Assets
Fixed asset management ensures that the company’s tangible and intangible assets are accurately reflected in the financial statements. This involves reviewing purchases, disposals, and any damages that could affect asset values.
For example, if a company sells an old piece of machinery, it should remove the asset from the books and recognize any gain or loss. Depreciation schedules should also be checked to ensure that depreciation is correctly recorded.
Consulting department heads helps identify obsolete assets that may no longer be in use, ensuring they are correctly disposed of or written off.
11. Finalize Other Accruals
In addition to revenue and expenses, various other accruals, such as vendor invoices for goods received but not invoiced, need to be captured. This process ensures that all expenses are recorded in the correct period, preventing distortions in profit.
Additionally, calculating allowances for doubtful accounts is critical to assessing the financial health of the business. Companies should also review stock options and tax provisions to ensure that liabilities are accurately reported, especially when these could impact the final year-end figures.
12. Prepare Financial Statements
Financial statements are the ultimate product of the closing process. The income statement, balance sheet, and cash flow statement provide a snapshot of the company’s financial health, detailing revenue, expenses, and net income.
This process often involves adjusting journal entries and ensuring that the right information flows into these statements. For instance, when reviewing the balance sheet, it’s important to check that all liabilities, including accrued expenses and loans, are accurately represented. Having templates for these statements helps streamline the process and ensures consistency in presentation.
13. Perform Account Reconciliations
Reconciliation of all balance sheet accounts helps verify that the financial statements are accurate and complete. This involves checking for discrepancies between sub-ledgers (like accounts payable or accounts receivable) and the general ledger.
Reconciliations should be done regularly to identify and resolve discrepancies early, and year-end reconciliation ensures that no material errors are left unaddressed. This practice also improves the reliability of the final financial statements and supports audit processes.
14. Analyze Fluctuations
Fluctuation analysis compares account balances and highlights significant changes over the period. This analysis helps identify unusual patterns or discrepancies that may signal accounting errors or missed adjustments.
For example, a large variance in inventory levels might indicate issues with stock counting, or a sudden spike in expenses might require further investigation. Identifying these fluctuations ensures the integrity of financial reporting and provides insights into operational efficiency.
15. Review Results with Management
Collaboration with senior management is essential to understanding the strategic implications of the year-end results. Management may provide context for discrepancies or unusual trends in financial performance, such as changes in market conditions or one-time expenses.
This discussion can help highlight key areas of focus for the upcoming year, and ensure that all stakeholders are aligned with the financial outlook.
16. Close the Books in the System
Finally, once all adjustments and reconciliations are completed, closing the books locks the financial data and prevents further changes. This step is crucial for finalizing the year-end reports and preparing for the next fiscal year.
By closing the books in your accounting system, you ensure the integrity of the year-end data and prevent any accidental changes or entries after the close. This is also a critical step for initiating the audit process and preparing for tax filings.
Incorporating these processes not only ensures compliance with accounting standards but also improves operational efficiency and transparency across the business.
Additional Recommendations
Plan Taxes Early: Analyze your financial position and consult with tax professionals to minimize liabilities while ensuring compliance.
Back Up Data: Use reliable backup solutions, such as cloud storage, to protect critical financial records from cyberattacks or IT failures.
Set SMART Goals For the Year Ahead: Based on the insights picked up throughout this process, now is a good time to set goals for the next fiscal year. Vincent shares how he approaches this at Groupe Ricochet: "I think that the end of year closing is a perfect learning opportunity. And sometimes I think companies don't see it that way."
By following this comprehensive checklist, you can ensure an efficient and precise year-end close, allowing your business to start the new year on strong financial footing. Embrace these practices to maintain transparency, foster trust, and support strategic growth in 2025.
What Can You Do to Make Year-End Closing Faster and Easier?
Year-end closing can be a complex and time-consuming process, but with the right strategies in place, you can streamline tasks and reduce the stress associated with closing your books. Here are some practical tips to make year-end closing faster and more efficient:
Start Early and Plan Ahead
The more you prepare in advance, the smoother the closing process will be. Begin gathering documents and reviewing financial data several weeks or even months before the end of the year. This proactive approach allows you to address any discrepancies early and prevent last-minute surprises.
For example, ideally you should review your accounts payable and receivable aging reports at least a month before year-end to identify any potential issues that need to be addressed. Setting early deadlines for submitting outstanding documents (like employee expenses or vendor invoices) ensures that you’re not scrambling at the last minute.
Implement Regular Reconciliation Throughout the Year
Rather than waiting until the year-end to reconcile accounts, adopt a habit of monthly or quarterly reconciliations. This proactive approach makes the year-end process more manageable because the majority of discrepancies and adjustments will have already been identified and resolved.
For example, reconciling bank statements and accounts payable monthly helps keep your records accurate and up-to-date, meaning less work during the final close. Regularly checking in on deferred revenue, inventory levels, and accruals ensures there are no surprises when it's time to finalize the books.
Standardize Processes and Templates
Create standardized processes and templates for key tasks like financial statement preparation, reconciliation, and reporting. Having a clear set of procedures allows your team to work more efficiently and ensures consistency from year to year.
Templates for common reports (income statements, balance sheets, cash flow statements) can save valuable time and ensure that all necessary information is included. Additionally, standardizing your chart of accounts and accrual processes can simplify data entry and prevent mistakes when transitioning from one fiscal year to the next.
Leverage Cloud-Based Tools for Collaboration
Cloud-based accounting software enables real-time collaboration between departments, ensuring everyone is on the same page and has access to the most up-to-date information. Instead of dealing with version-controlled spreadsheets or emailed reports, cloud platforms like Intuit QuickBooks, NetSuite and Xero allow your team to work together seamlessly from anywhere, streamlining document sharing and task delegation.
Having real-time access also helps ensure quicker reviews, approvals, and sign-offs, reducing bottlenecks in the process.
Train Your Team and Involve Key Stakeholders
Effective year-end closing is a team effort. Ensure that all relevant team members are well-trained on the processes and tools they need to use. Having a clear understanding of each person's role and responsibilities, combined with proper training on accounting software and tools, can prevent delays and confusion during the year-end close.
Additionally, involve key stakeholders (like department heads or external auditors) early in the process to avoid last-minute surprises or bottlenecks. Regular communication ensures that everyone is aligned and helps prevent last-minute scrambling for approvals or missing documents.
As Margherita from Casavi puts it: “Communicate your goals clearly. Use management round tables and all hands meetings. This is a very stressful time for finance, so it's important that your colleagues do not add on the workload, but instead help ease it.”
Conduct a Post-Close Review
After the year-end close, take time to review the process with your team and identify areas for improvement. A post-close debrief allows you to evaluate what worked well and what didn’t, making the next year’s close even smoother.
Ask for feedback on pain points or bottlenecks that caused delays, and adjust your processes accordingly. Continuous improvement ensures that each year’s close is more efficient and less stressful.
By focusing on automation, standardization, and proactive planning, you can make year-end closing a faster and more organized process. With these strategies in place, you’ll reduce stress and increase the accuracy and efficiency of your year-end financial reporting.
How Upflow Can Help
Upflow is a Financial Relationship Management (FRM) platform, with powerful automation capabilities designed to streamline the collection process, reduce Days Sales Outstanding (DSO), and enhance cash flow management.
Using Upflow, and the data you can glean from our solution, as part of your year-end closing procedures will help you achieve a more efficient and accurate financial close.
But how exactly does Upflow help facilitate your year-end close?
1. Automated Cash Collection
Upflow can help you automate collection workflows, sending personalized reminders to customers and reducing the need for manual follow-ups. This ensures that outstanding invoices are addressed promptly, leading to faster payments and less time spent chasing outstanding invoices days before year-end.
2. Enhanced Cash Flow Visibility
With Upflow's real-time AR dashboards, you gain comprehensive insights into your receivables, enabling better financial reporting and forecasting. This visibility allows for more accurate year-end financial statements and aids in strategic decision-making.
3. Simplified Payment Processing
Upflow offers a customer payment portal that supports various payment methods, including credit cards, direct debits, and wire transfers. Simplifying the payment process encourages timely payments, reducing the volume of outstanding receivables at year-end.
4. Integrated with Existing Accounting Systems
Upflow seamlessly integrates with popular accounting software such as QuickBooks, Xero, and NetSuite. These integrations ensure that your receivables data is accurately reflected in your financial records, facilitating a smoother year-end close.
5. Better Team Collaboration
By involving both finance, sales and other business teams in the receivables process, Upflow fosters better communication and collaboration. This unified approach helps in resolving discrepancies promptly and ensures that all stakeholders are aligned during the year-end closing.
As Margherita from Casavi sums up: “Upflow provides a great overview of accounts receivable overtime, it helps identify patterns in customers payment behaviour and can be used to send out payment reminders directly.”
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