The approaching end of the fiscal year always signals a flurry of activity for finance teams worldwide. As your accountants and financial professionals gear up to close the books for the year, they need to prepare year-end accounts, statements, and financial reports. This process is demanding and requires a high level of concentration, precision, and a significant investment of time and effort.
On average, accounting teams dedicate around 25 days to complete the annual close, which is a critical period that coincides with month-end closing and quarter-end reporting. This adds more pressure to an already heavy workload for accountants, who find themselves overwhelmed with numerous responsibilities and the need to deliver accurate and timely financial information.
However, amidst the chaos, there is a way to alleviate stress and enhance productivity during this crucial time. By establishing and adhering to a well-defined workflow, finance professionals can streamline their year-end closing cycle.
In this article, we will discuss the ultimate year-end accounting checklist for 2023. This includes: what is year-end accounting, year-end accounting challenges, and steps needed for a successful year-end close. Let’s begin!
What is year-end accounting?
Year-end accounting, also known as year-end closing, refers to the period at the end of a company’s fiscal year when all financial transactions are completed, financial statements are prepared, and financial accounts are reconciled before the end of the fiscal year.
The year-end close process can be a complex and demanding task for businesses due to the sheer volume of financial records that need to be reviewed and analyzed. It requires a significant amount of work and attention to ensure that all transactions are accurately recorded and comply with regulatory requirements.
Businesses must identify any adjustments that need to be made, review financial statements, and prepare for audits, which can be a time-consuming and challenging process. Overall, the year-end close process requires careful planning, organization, and dedication to ensure that everything is completed accurately and on time.
Unlike the calendar year, which starts on January 1st and ends on December 31st, the fiscal year is a 12-month period that can begin on any day a business is registered. Business owners can leverage this flexibility to choose a year-end closing date that is tailored to their industry standards and business goals.
The year-end close, although a recurring task, can pose significant challenges for accounting teams, adding to their already demanding workload and causing additional stress. The next section will explain why closing the financial year can become such a difficult task for accounting teams.
End-of-year accounting challenges
The fiscal year-end preparation is a demanding process for accounting teams, who must navigate various challenges. Some of the most common end-of-year accounting challenges include:
Human error – Managing year-end accounts is a tedious process as all financial accounts must be checked carefully for discrepancies and omissions. Every amount must be accounted for and all supporting documentation available for a possible tax audit. Even a simple human error in the accrued expenses, for example, can be costly and damage relationships with suppliers and employees.
Inefficient communication – Communication is vital during the year-end close process, but it can be challenging to keep everyone on the same page. Accountants often need to communicate with multiple departments to obtain the necessary documentation and information. However, inefficient communication often results in time-consuming and unproductive information chains filled with back-and-forths that only make end-of-year accounting take longer.
Manual data entry – Manual data entry is a time-consuming process, particularly challenging during the end-of-year accounting process when accounting teams are working with large volumes of data. An increase in manual invoice processing volume can demand more employees and resources. This is why you should consider more effective methods like automated data entry, to improve your end-of-year accounting process.
Missing receipts and invoices – During the fiscal year, keeping track of paper receipts and supplier invoices can be a headache. However, as the year-end approaches, the pressure to conduct payment reconciliation grows stronger. Missing receipts and invoices can cause significant delays in the fiscal year-end close process and can lead to inaccurate financial statements that may bring about legal concerns.
Don’t let year-end closing difficulties catch you off guard! It can be a challenging and time-consuming task for any accounting team. To overcome the common struggles that arise during year-end closing, it’s essential to have a clear plan in place. Fortunately, we have created a checklist for you to make the process easier.
End-of-year accounting checklist
To help simplify the year-end close, our end-of-year accounting checklist provides a comprehensive list of steps businesses should follow to minimize the stress and uncertainty around this process.
By following these steps, businesses can ensure that they are fully prepared for the year-end close and that their financial records are accurate and up-to-date.
Prepare a closing schedule
- Establish a specific timeline of important dates and activities that need to be performed, including data processing, reporting, and the fiscal close date.
- Plan ahead and set reminders for upcoming tasks to stay on track.
Gather outstanding invoices & receipts
- Collect all invoices and receipts needed to close the books.
- Communicate the requirements to employees and give them sufficient time to submit documents.
- Expect delays and provide reminders to ensure that nothing falls through the cracks.
Review asset accounts
- Review asset expenses and keep track of fixed assets and any impairment losses that need to be accounted for.
- Reconcile all cash accounts and account for relevant transactions.
- Determine the value of all assets your company currently owns and ensure the accuracy of your financial statements.
Reconcile all transactions
- Resolve any discrepancies or errors, and ensure that all items are appropriately classified in your accounting system.
- Guarantee that all recorded transactions match credit card statements, bank statements, invoices, and receipts.
- Pay attention to the smallest details to be audit-ready for the fiscal year-end.
Close out accounts receivable and payable
- Differentiate the amounts received or paid against what has been accrued.
- Ensure that you have accurate records of all outstanding invoices and bills, and create adjusting entries for any uncollected or unpaid balances (also known as accounts payable).
Accrue accounts receivable
- Include any outstanding receivables as credits on the income statement and debits on the balance sheet.
- Monitor your accounts receivable report and identify any overdue or collectible balances, this is critical for starting the new fiscal year with accurate financials.
Accrue accounts payable
- Keep track of all your company debts to manage your finances effectively following the steps of the accounts payable process.
- List any unpaid debts as liabilities or accrued payables on the balance sheet.
- Ensure that all expenses have been recorded in the correct period.
Adjust grants and entitlements
- Don’t forget to record any grants or entitlements that your business received during the fiscal year.
This includes government contributions, special tax exemptions, and private grants, which must be properly accounted for in your financial statements.
It’s clear that with year-end accounting, there are numerous tasks to complete and challenges to overcome. The good news is, there are solutions available that can simplify the end-of-year accounting process and make it less daunting.
One solution is Klippa SpendControl. In the next section, we will explain more in-depth how this easily adaptable expense management software and invoice processing software can help simplify the year-end close process for businesses.
Simplify your next year-end close with Klippa SpendControl
As the fiscal year-end approaches, businesses everywhere need to gear up to properly close their accounting books. That’s where Klippa SpendControl comes in, offering a simple solution to simplify all your next year-end close pursuits.
Klippa SpendControl can streamline the approval process for expenses and invoices, which means that your expenses are always approved or rejected quickly by being automatically routed to the authorized employees through set business rules, reducing the risk of errors and delays.
Accurate and automated financial management, allows companies to track and categorize their expenses throughout the year.
Klippa SpendControl, for example, helps ensure all data is up-to-date, providing you with real-time overviews and insights. This means there’s no need to wait long for expenses and invoices to be processed and all steps to be completed. Instead, you can stay on top of your expenses and financial reporting at all times, enabling you to make better-informed decisions based on accurate, up-to-date information.
SpendControl is an all-in-one financial management solution that facilitates expense management and invoice processing automation. Klippa’s software solution is capable of optimizing and streamlining your accounting and financial processes for the year-end close. Enjoy a fully automated and digital process for submitting, authorizing, and processing expenses using both web and mobile applications.
With SpendControl you can:
- Achieve 99% accuracy of data extraction from invoices and receipts with Klippa’s OCR technology and eliminate manual journal entry
- Save more than 70% on your document processing time by eliminating endless manual retyping of invoices with automatic data extraction
- Detect duplicate and fraudulent invoices with sophisticated AI technology to minimize invoice fraud
- Enhance your data processing scalability by processing receipts safely and quickly at scale using Klippa SpendControl
- Seamlessly integrate SpendControl into your existing accounting or ERP software such as Xero, NetSuite, and SAP for a better overview of your year-end accounts
- Maintain compliance with accurate financial reports using Klippa’s user-friendly interface through easy file submission, payment approval, and expense reporting workflows
- Change currencies based on a daily rate or set your own rate and import creditors, cost centers, and VAT codes
Overall, Klippa SpendControl is a powerful software that can help businesses of all sizes to streamline their year-end close process.
Are you looking to simplify the year-end close process and improve your accounting workflows? Be sure to book a demo today!