Do you hear the clock ticking? Tick, tock, tick, tock. It never stops. Same with the unrelenting onslaught of the calendar, peeling off days with unnerving speed as your year-end reporting requirements edge closer and closer.
You wouldn’t be alone if that paragraph made your pulse quicken just a tad as accounting and finance teams look at the year-end closing through a mixture of fear, trepidation, and loathing. But here’s the thing about the oft-maligned year-end close – there really isn’t much to fear as long as you organize, coordinate, and have a keen sense of direction.
So think of these sage words – Embark’s Year-End Accounting Checklist and Other Tips – as a compass of sorts, chock-full of insights and best practices, including topics like:
- Workflow timelines
- Financial close software
- Sox compliance
- Working with auditors
- And more!
Further, we’re also including a handy checklist that you can customize for your year-end close, making sure you’re always on-point, on-track, and on-time with your year-end close and reporting. Sounds pretty great, right? So let’s stop burning daylight and dive right in.
Start With a Workflow Timeline
Before launching into the checklist, we need to first establish a solid footing. After all, given how slippery year-end terrain can be, there’s no point in knowing your destination – your year-end close and reporting – if you lack the ability to get there. And a workflow timeline is critical for that solid footing.
In a way, a timeline serves as a pre-checklist to your year-end checklist, if that makes any sense, by clearly stating when everything involved is due. Reconciliations, journal entries, various draft and final reports – you need to make sure you’re checking the right boxes throughout the year or your year-end is destined for catastrophe.
In fact, look at your year-end close as a juiced-up, more comprehensive version of the month-end close that, not coincidentally, also depends on your ability to stay consistently on-track. And as you might’ve guessed, we have some tips around the workflow timeline:
- Designate someone from the team to serve as timeline master supreme, i.e., project manager
- Conduct a kickoff meeting – including your auditors – to start on the right foot
- Incorporate all tasks and information required for your year-end
- Assign ownership/responsibility for each of those tasks, typically the same owner for the corresponding month-end process
- Be specific with check-ins and due dates, keeping in mind the dependencies between different responsibilities and roles
Depending on whether you’re a public or private company, there may be different reporting deadlines or even debt covenant requirements driving your workflow.
Don’t Forget Your Auditors’ Schedule
Likewise, there are obviously more cooks in the year-end kitchen than in your month-end close process, auditors being at the top of that list. Therefore, when building your timeline, keep your auditors’ schedule in mind along with the various provided-by-client (PBC) items they’ll need. Otherwise, you’ll miss deadlines because they miss deadlines, and that’s not a great look for anyone.
Build Your Checklist Block-by-Block
Now that we have the foundation down pat, let’s start building your actual year-end checklist by ensuring you’ve tied all loose ends.
Wrap-Up Your Final Month Close
While this might seem obvious to some, there can be a tendency to put the year-end cart before the horse. Most companies have at least 50, if not 100, very detailed items in their month-end close procedures. Therefore, it just makes sense to wrap-up the final month-end close before diving into the year-end biggies and audit items.
There’s only so much time, energy, and resources to go around, so diluting your efforts across too many fronts can create lackluster results for all.
A Quick Aside For Private Companies
Before we continue, we want to point out that some private companies – smaller and younger ones, in particular – might not have the detailed monthly closing procedures as larger, more experienced ones. Because of this, teams from such companies often face more work when booking certain year-end items, including:
- Long-lived assets, including depreciation and amortization
- Non-recurring journal entries
- Cash reconciliations
- AR and AP reconciliations
The point is, understand your own situation and always be sure to include the extra time and resources needed to accomplish certain year-end tasks, the ones that larger or more established companies might address throughout the year via monthly or quarterly procedures.
Review Where You Stand
At this point, you’ve finished your final month-end close and have the raw financial data needed to drive your year-end financial reporting. Now, while we know you’re anxious to get the ball rolling, we recommend taking a moment to look at that data, compare it to the prior year, and get a sense of your financial bearings.
Does everything pass the smell test? If not, can you spot any journal entry completeness issues or errors? Now’s the time to clean those up before you start preparing your year-end financial statements or other reporting packages for debt covenants or board commitments.
Perform and Review Reconciliations
Getting to the nitty-gritty, your reconciliations are front and center in the year-end close. Thus, you need to record all journal entries relevant to your reconciliations and, just as importantly, ensure the reconciliations tie to the general ledger (GL).
Once completed, your controller, accounting manager, or whoever oversees that function must review the reconciliations, making sure they’re correct and tie to the GL. Buttoning up those reconciliations is one of the most effective ways to ensure proper financial reporting and to help prepare for the auditors and their PBC list.
Choosing the Right Software
When it comes to actually performing your reconciliations, remember that companies come in all shapes and sizes. Thus, there’s no single suggestion we can make on reconciliation software that’s going to fit everyone. While most simply use good ol’ Excel, some might also rely on their GL software to keep everything on-track for more complex or significant accounts.
Many companies also find solutions like FloQast helpful in managing close procedures and overall workflow. Simply put, the size of your organization and specific needs will determine what software fits you best.
Keep SOX Top-of-Mind
Companies should also keep SOX in their mindset during this reconciliation process since it encompasses many of the items they’ll need to support their SOX compliance and reporting, especially the control environment.
Therefore, as you’re performing your reconciliations and reviews, you can also be completing your SOX control worksheets – for lack of a better term – that you must both fill-out and retain for SOX documentation compliance.
But it’s not just public companies that are focused on internal controls. In fact, internal controls are critical to public and non-public organizations alike. Auditors will, at a minimum, evaluate the design and implementation of a company’s relevant controls, including their reconciliations, even for AICPA audits.
Circle the Financial Reporting Wagons
Once everything’s closed, reconciliations and reviews completed, and all entries in the books, it’s time to narrow your focus on reporting. Whether you’re preparing a reporting package or year-end financials, you start by populating all necessary items that inform your reports and disclosures. Of course, this also helps your C-suite gauge where you stand in the year-end reporting process.
We suggest you begin with your financial statements and, once complete, address any needed reports, disclosures, and notes to your financial statements. Solutions like Workiva’s platform can help enhance collaboration, improve efficiency, and increase accuracy across your year-end close and statement preparation.
Bring Your Auditor’s Input Into the Fold
This is the point where the auditor’s input becomes – or should become, at least – more pronounced. Your auditor will often require you to complete a separate disclosure checklist indicating which significant accounts and disclosures are relevant to your company.
As you prepare your disclosures, be sure to generate everything your auditor will need to help ensure completeness and accuracy, including any requested internal metrics. This is another area where an automated platform like Workiva can work wonders for your workflow efficiency.
Make your Audit Adjustments
Now let’s fast forward a bit, to the point where your audit has left a stack of audit adjustments staring you in the face. As the final high-level point on this review of your year-end procedures, this is where you either open the books back up and make those necessary audit adjustments or record “top-side” into the financial statements themselves, if material. Keep in mind that there’s plenty you can do to ensure a smooth financial audit and, thus, minimize audit adjustments.
Year-End Best Practices
Before we unleash our comprehensive accounting checklist that you can fully customize for your year-end close, we want to give you a few pointers culled from our experience on the year-end frontlines. Think of these as insider tips stemming directly from our metric ton of hands-on experience.
Communication Is Key
A single late task or report can easily create a cascading effect that torpedoes the entire process. That’s why communication is so important, keeping everyone apprised of progress and potential bumps in the road.
If someone is running late with something, they shouldn’t keep it to themselves. By announcing it to the team, perhaps other people can chip-in to help get the item back on schedule. At the very least, clear communication keeps other process owners in the loop so they can adjust as needed. This also includes those outside the organization – tax or valuation specialists, for example – that provide vital information necessary for your team to complete your accounting close.
Keep an Eye on the Road Ahead
When it comes to your year-end, there are few things worse than a mad scramble to fix items that you could’ve addressed earlier in the year. For example, if a complex accounting transaction occurs during the year – maybe an acquisition in Q2, for instance – try to complete all the necessary accounting analyses and resulting journal entries ahead of year-end when your plate is already running out of space with all the other commitments and challenges at that time.
Don’t leave for tomorrow what you can do today, keep your head on a swivel, avoid kicking the can down the road – whatever your preferred colloquialism, you get our drift. Stay on the lookout for arising issues and address them throughout the year to leave your year-end as worry-free as possible.
Seek Outside Help When Needed
You’re not alone when it comes to your year-end, kiddo. There are plenty of outside experts that can lend a helping hand as long as you loop them in early enough. Always keep in mind that the right third-party consultants can save you time, resources, and innumerable headaches, but that even the best of the best aren’t magicians. Don’t wait for things to implode before asking for help.
Support Your Reconciliation Numbers
To revisit a previous topic, your reconciliation process is under a bright spotlight during your year-end closing and reporting. For that reason, it’s always a good idea to make sure you can support the numbers you’re booking.
Pulling GL data or activity won’t cut the audit mustard when you need to support a reconciliation. Therefore, whatever prompted you to make a particular entry – may be a specific payroll register or invoice – keep it readily available to prevent a wild goose chase if the auditors happen to ask for it.
Embark’s Parting Words
On that note, we present you with the star of the show –The Accounting Close Checklist Template that you can bend to your organization’s specific needs come year-end close. Just keep in mind that every company, including yours, is a little different. Or sometimes a lot different. Thus, although extremely useful in providing the lay of the land, a template like the following is really just a starting point.
So customize our checklist to your specific needs, and don’t forget that your year-end gurus at Embark are here when you need us.