Close Da Books & Hit Them Slopes

As an experienced corporate accountant and financial controller, I've spent countless hours perfecting the year-end close process. Over the past 15 years, I've closed the books month after month, year after year, and I've developed a comprehensive checklist to ensure a smooth and efficient year-end close.

In this in-depth blog post, I'll walk you through the key steps and best practices to close out the financial year, covering everything from billing and accounts receivable to payroll, inventory, and financial reporting. Whether you're a seasoned accounting professional or new to the year-end close process, this guide will provide you with the knowledge and tools you need to get the job done right.

So, let's dive in and explore the ultimate year-end close checklist!

BTW, feel free to download the Excel version here:

https://thefincontroller.com/p/year-end-checklist

A) Routine Transactions

The first section of the checklist covers routine transactions that occur throughout the year, such as billing, accounts receivable, accounts payable, cash management, and payroll. These are the day-to-day activities that need to be meticulously reviewed and reconciled to ensure a successful year-end close.

Billing and Accounts Receivable

• Compare the warehouse shipments report to your invoices to ensure a complete list of invoices on your books and records.
• Compare invoices to the customer purchase order (PO) listing to verify the completeness of your invoicing.
• Review the last two days of the month to ensure the proper cut-off of revenue recognition, especially for retail and manufacturing businesses.
• For service-based businesses, compare job logs or hourly logs to your invoices to confirm the completeness of your invoicing.
• Perform a month-over-month flux analysis by customer for software or SaaS businesses to identify any fluctuations that may signal missing or over-invoicing.

These activities should be completed within the first one or two working days of the new month, as they are crucial for ensuring the accuracy and completeness of your billing and accounts receivable records.

Accounts Payable

• Review the email inbox (or other vendor bill submission channels) to ensure all vendor bills have been processed.
• Follow up on any unapproved vendor bills and send reminders to get them processed and approved.

Closing out accounts payable is a critical step in the year-end close process, as it allows you to move forward with other activities, such as fixed asset management and accruals. Aim to complete these accounts payable tasks by working day two or three.

Cash and Credit Cards

• Match cash receipts to open customer invoices throughout the month to ensure proper cash application.
• Match cash disbursements to open vendor bills throughout the month to ensure proper vendor payment processing.
• Reconcile the cash accounts to the bank statements on working day one, resolving any differences.
• Reconcile credit card accounts to the credit card statements, ensuring all expenses have been properly recorded.

Keeping a tight grip on cash management and credit card reconciliations is essential for a successful year-end close. Be sure to complete these tasks early in the process, as they provide a solid foundation for the remaining activities.

Employee Expenses

• Send email reminders to employees to submit their expense reports, and to managers to review and approve those expenses.

Proactively managing employee expense submissions and approvals will help ensure a smooth transition into the payroll and other compensation-related tasks.

Payroll and Other Compensation

• Record the payroll journal entries in your accounting software.
• Calculate and record any salary or vacation accruals, as needed.
• Calculate and record any bonus or commission accruals, following the appropriate approval process.

Payroll and other compensation-related activities are crucial for the year-end close, as they directly impact your financial statements. Be sure to review the relevant videos in the description for more detailed guidance on these topics.

Watch The Video Version Here: https://youtu.be/5XiQmnBXWuM

B) Non-Routine Transactions

The second section of the checklist covers non-routine transactions, which are the activities you don't perform on a daily or weekly basis, but rather at the end of the accounting period or year.

Revenue Accruals

• Review the amortization schedule for any deferred or unearned revenue, ensuring the proper recognition of revenue.
• Identify any unearned revenue that should be accrued as earned but unbilled revenue.
• Review new customer contracts entered into during the period to ensure proper revenue recognition.

Proper revenue recognition is essential for accurate financial reporting.

Inventory Accruals

• Compare the warehouse inventory report to the general ledger, investigating and recording any differences.
• Check for obsolete or expired inventory and record the appropriate write-offs.
• Review any goods received but not yet invoiced, and accrue the corresponding inventory and accounts payable.

Inventory management is a critical component of the year-end close, as it directly impacts your cost of goods sold and overall profitability. Ensure you have a thorough understanding of your inventory levels and any necessary adjustments.

Fixed Assets and Other Assets

• Send department managers a list of fixed assets for review and identification of any disposals or obsolescence.
• Review the additions of fixed assets throughout the year, ensuring proper capitalization and depreciation.
• Identify any internally developed software that may qualify for capitalization, and set up the necessary amortization.
• Perform an impairment analysis for any intangible assets, such as goodwill.
• Review the classification of assets as short-term or long-term, making any necessary adjustments.

Fixed asset management is a complex area that requires close attention to detail. Engage with your department managers and, if necessary, seek guidance from your auditors or an outside accounting firm to ensure you're handling these transactions correctly.