The Complete Year-End Accounting Checklist

The time has come to manage the closure of the year’s finances. Ideally, accounting professionals should receive payment for every service they bill, on time, every time. However, businesses often have to consider what they can do about their end-of-year finances when debt is on their books.

With a good plan in place, you can process your receivables and, eventually, collect those outstanding accounts, perhaps even those you've almost forgotten about.

In this article, we’ll discuss why the end-of-the-year closing process can be so challenging, a comprehensive checklist to help ensure successful year-end closing, and how your firm can prep for the following fiscal year.

What is Year-End Closing for Accounting?

For accounting professionals, the year-end closing process involves taking an in-depth look at a company's financial transactions and ledgers over the past fiscal year—with the ultimate goal of creating a finalized financial record. This typically includes the following:

• Calculating a company's business expenses, total revenue, investments, income, and equity over the course of the fiscal year.

• Double-checking a company's budgets against its spending to identify discrepancies.If any discrepancies are found, they must be cross-examined with the appropriate parties and remedied within the company's ledger.

• Compiling an accurate and itemized profit and loss statement, cash flow statement, and annual balance sheet.

This is by no means an exhaustive list; the steps required can also vary depending on the nature of the business going through the year-end accounting process.

What Makes the Year-End Closing Process so Challenging?

One of the most significant issues that may arise when managing the books is the discovery of certain items that are missing or unaccounted for properly—such as a lost invoice or receipt. As a result, the accountant will need to spend time tracking down who might be responsible for the missing financial transactions/ details and rectify the issue as soon as possible—leading to delays.

Likewise, simple human error can cause significant headaches for end-of-year accounting. For instance, if a massive spreadsheet has an error or typo, it can create an inaccurate view of a company's finances. These types of mistakes can throw off projections for the next year. Even if an accounting professional tries to automate the process, a misclick or a typo in a formula can result in equally inaccurate data.

Furthermore, when data is missing, chasing it down can become a hassle. In worst-case scenarios, the relevant parties may not provide the correct information or may no longer have access to the data.

Problems can also arise from scheduling conflicts and communication breakdowns as year-end closing often coincides with a busy time for businesses and many employees taking time off.

Furthermore, relying on outdated software or failing to update systems regularly can also increase the risk of issues, which is why accounting firms should prioritize upgrading their accounting tech stack before this busy period.

While some of these issues are not always foreseeable or preventable, they are nevertheless important considerations for any accounting professional looking to perform end-of-year accounting for any client. The more prepared a professional can be for the worst, the better off the entire process will go.

The Definitive End-of-Year Accounting Checklist

Thankfully, there are many ways for accounting professionals to maximize the success rate of their activities with this year-end bookkeeping checklist. The following can help prevent the process from feeling overwhelming and ensure you have covered all essential bases nearly any company will need for their year-end closing.

1. Compile all Financial Statements

A good starting point is to collect all of the company’s financial statements undergoing the year-end closing process. A year-end financial statement typically consists of:

• Bank statements
• Statements from credit cards
• Inventory counts
• A copy of last year's tax return
• Account statements for loans
• Merchant statements
• Payroll reports

Ideally, all of your year-end financial statements should already be in digital format. If not, it is recommended that you scan hard-copy documents so that each can become digital.

2. Collect on Outstanding Invoices

Another step in an effective year-end accounting checklist is collecting all outstanding invoices. Obviously, this is challenging, as you won't always have control over whether your clients pay your bills on time (or at all). If you have outstanding invoices, categorize them based on how likely you think a client will make the payment before the end of the fiscal year. Generally speaking, the younger the unpaid invoice is, the more likely you'll be able to coerce a payment out of the client in question. Instead of relying on mass emails that often get ignored, sending regular, personalized reminders is much more effective. This is where the right accounting software can make a night and day difference.

CPACharge, a payment solution designed specifically for accountants, has tools to simplify this whole process. Not only can you create professional, personalized invoices that reflect your brand, but you can also effortlessly track them. With CPACharge's invoice tracker, you can see the status of every invoice, whether it's been sent, viewed, or paid. This makes it incredibly easy to follow up on unpaid invoices. With CPACharge you can also remind clients in a professional manner that payment is due, without damaging your relationship.

Learn how finance and accounting teams can collect unpaid invoices in our “Year-End Accounting Guide: Closing on Strong Financial Footing” e-book.

3. Closeout Payable Accounts

Any outstanding balances or invoices the business owes should be noted and resolved to maintain a healthy cash flow going into the new year. Make sure you speak to the necessary parties at the company and have them make these payments as soon as possible.

You may also need to follow up with the relevant parties to ensure there are no issues on their end. Sometimes a payment may have been rejected or lost in the mail. Creating a proper follow-up process with the business can help minimize outstanding invoices.

4. Reconcile Bank and Credit Card Accounts

Reconciling bank and credit card accounts is critical for accurate year-end reporting. This means comparing your bank statements with your records and fixing any differences to ensure the balances match. You might need to adjust for things like outstanding checks or bank fees. For law firms, three-way reconciliation adds an extra step—checking your bank statement, internal records, and client ledgers to ensure accurate handling of client funds. This verifies that all client money is properly accounted for.

CPACharge simplifies this process with built-in three-way reconciliation and features designed for efficient trust account management—making it easier to track client funds and ensure compliance.

5. Back up all Data

Before closing the books for the year, create secure backups of all your financial data. This includes client records, accounting software files, and any other critical information. Scanning these vital documents will help serve as a backup system in case they are lost or destroyed.
In the long run, digital copies will be significantly easier to deal with, as modern accounting technology can access them and expedite processing their contents.

6. Review Client Information

Strong client relationships are built on accurate information. Take this time to review and update your client database. Verify contact details, addresses, and any relevant information to ensure smooth communication and maintain those valuable connections.

How to Prep Your Accounting Firm for the Next Fiscal Year

Review Profit vs. Loss

An accounting firm undergoing the year-end close process should have easy access to its income statement. This document is essential in determining whether you had a year that exceeded expectations (with record profits and goals met) or fell short of expectations (with lost money and unforeseen expenses). An income statement is also helpful in determining how solid the firm's bottom line will be going into the new year—as it can project patterns throughout the fiscal year and help the business make informed decisions going forward.

Set New Goals

Naturally, the end of the year is an excellent time to begin creating goals for the new year. Aside from carrying over any plans that have already been put in place, create a list of goals the entire company can work towards. We recommend following the S.M.A.R.T. system (Specific, Measurable, Achievable, Relevant, and Time-Sensitive).

When these parameters are defined according to your goal, you will be able to ensure that your objectives are achievable within a certain period of time. This approach can also help you laser-focus your ideas and ensure your plans can be actualized in the coming year.

Implement New Best Practices

Review your firm's practices and see where any improvements can be made. A more streamlined firm can produce faster results and better serve its clients in the long run.

The first step might be to create a roadmap that explains your firm's policies regarding payments and how much the engagement will cost. If your firm is the right fit for the client, you need to determine how they intend to pay for your services. You should include all of this information in your fee agreement.

You may also consider getting ahead of your accounts receivable and billing methods by following up with them in advance. Set a reminder on your calendar to check your bills' payment status about a week after they are sent. Then, reach out to these clients to ensure the bill is top of mind.

Evaluate Your Tech Stack

Modern accounting technology can work wonders within your organization and when assisting clients. One of the easiest and most effective ways to upgrade your current technology stack is by implementing an online billing and payment solution. These versatile software solutions enable you to expand your invoicing and payment options to accommodate a variety of billing situations and best practices.

Leveraging Technology for Streamlined Year-End Accounting

Year-end accounting can be a complex process, but CPACharge simplifies many crucial tasks. Here are some of the ways CPACharge can help during your year-end close process:

• Automated invoicing: Send invoices automatically with customizable templates and scheduled reminders.
• Online payment portal: Clients can easily view and pay invoices online 24/7.
• Faster payment processing: Get paid faster with online debit, credit, or eCheck payments and improve cash flow.
• Accounting software integration: Automatically reconcile payments with your accounting software.
• Enhanced security: Protect client payment data with PCI Level 1 compliance.

These features also help optimize accounting workflows, improve accuracy, and dedicate more time to serving their clients.

Turn Year-End Challenges into Opportunities with CPACharge

The fiscal year close of an accounting process can feel like a challenging time. But what if, instead of a dreaded deadline, year-end accounting can become a springboard for becoming an even more successful accounting firm?

Plan ahead and create a schedule to stay organized. Keep your clients in the loop about bills and deadlines to maintain strong relationships. And don't forget to leverage technology. CPACharge can simplify your billing and save you valuable time. With a little effort, you can turn year-end from a challenge into an opportunity.

Want to see how CPACharge can streamline your accounting processes? Book a demo today and discover how our tools can help you close the year on a high note.