Year-End Checklists for Businesses

It’s never too early to prepare for the year-end close. As the year comes to a close, businesses across industries face the critical task of closing their financial books. The year-end financial close process is essential for ensuring accuracy in financial reporting, meeting tax obligations, and preparing the business for the year ahead. Whether you’re a small business owner or a finance leader in a large company, having a clear, structured process can save time, reduce stress, and help avoid costly errors.

Here’s a year-end financial close checklist to guide you through a smooth and efficient closing process.

1. Reconcile All Accounts

Reconciliation is a fundamental step in the year-end close process. Ensure that all accounts (bank accounts, credit cards, and loans) are reconciled, matching your internal financial records with the corresponding bank statements. Look for any discrepancies, such as missing transactions, duplicate entries, or unexplained variances.

Action Points:

• Reconcile all bank accounts, credit cards, and loan accounts.

• Resolve any discrepancies by identifying and correcting errors.

• Ensure that all transactions, including transfers between accounts, are properly recorded.

  
  

2. Review Accounts Receivable and Accounts Payable

Managing outstanding invoices and payments is crucial to accurately reflect the company’s financial position. Review your accounts receivable (AR) to ensure that all customer payments are accounted for and follow up on overdue invoices. Similarly, review your accounts payable (AP) to ensure that all vendor payments are recorded and any outstanding obligations are reflected.

Action Points:

• Review all customer invoices and follow up on outstanding payments.

• Ensure that all vendor bills are recorded and scheduled for payment.

• Adjust for any bad debts or write-offs that need to be recognized.

  
  

3. Perform Inventory Count and Valuation

If your business holds inventory, performing a year-end physical inventory count is essential for accuracy. Compare the physical count to the inventory listed in your accounting system to identify discrepancies. Additionally, review the valuation of inventory, including adjustments for any obsolete or damaged goods.

Action Points:

• Conduct a physical inventory count and reconcile with the accounting records.

• Adjust inventory for obsolescence, shrinkage, or damage.

• Ensure proper valuation of inventory, using methods like FIFO, LIFO, or weighted average.

  
  

4. Review and Update Fixed Assets

Review your company’s fixed assets, such as equipment, vehicles, and buildings. Ensure that any new assets acquired during the year are properly recorded and depreciated. Additionally, retire or dispose of any assets no longer in use.

Action Points:

• Update fixed asset records with new purchases, sales, or disposals.

• Calculate and record depreciation for the year.

• Adjust asset values for any impairments or revaluation.

  
  

5. Accrue Expenses and Liabilities

It’s important to account for any accrued expenses or liabilities that may not have been paid by year-end but are still owed. This includes expenses such as employee bonuses, utilities, and other services received during the year but not yet invoiced.

Action Points:

• Accrue employee bonuses, salaries, and benefits owed but not paid.

• Accrue for utilities, rent, or other services used but not yet billed.

• Review any outstanding tax liabilities, including payroll taxes and sales taxes.

  
  

6. Review Payroll and Employee Benefits

Payroll is one of the largest expenses for most businesses, and accurate reporting is crucial. Ensure that all payroll for the year is complete and properly recorded, including year-end bonuses, benefits, and taxes. Review employee benefits such as retirement contributions to ensure compliance with government regulations.

Action Points:

• Ensure all payroll, bonuses, and benefits are accurately recorded.

• Review tax withholdings, including income taxes, CPP, EI, and other payroll-related taxes.

• Verify the accuracy of employee benefits contributions and retirement plans.

  
  

7. Prepare Financial Statements

The primary goal of the year-end close is to produce accurate financial statements. These include the income statement (profit and loss statement), balance sheet, and cash flow statement. These reports provide a snapshot of the company’s financial health and are essential for making informed decisions in the coming year.

Action Points:

• Prepare the income statement, ensuring all revenue and expenses are accounted for.

• Prepare the balance sheet, reconciling all assets, liabilities, and equity.

• Prepare the cash flow statement, reflecting all cash inflows and outflows for the year.

  
  

8. Conduct a Tax Review

Tax planning and compliance are critical parts of the year-end close. Review your company’s tax situation to ensure you’ve properly recorded all tax liabilities, deductions, and credits. This step is essential for filing accurate returns and avoiding penalties.

Action Points:

• Review income tax liabilities and make necessary year-end adjustments.

• Ensure all sales tax and payroll taxes are recorded and paid.

• Gather supporting documentation for tax deductions and credits.

  
  

9. Review Financial Records for Audit Readiness

If your business undergoes an annual audit or review by external auditors, ensure that all financial records are properly documented and easily accessible. Having well-organized records can expedite the audit process and ensure compliance.

Action Points:

• Ensure all financial records, including supporting documents, are well-organized.

• Reconcile key accounts such as cash, receivables, payables, and inventory.

• Prepare schedules for auditors, including detailed reconciliations and analyses.

  
  

10. Close Out the Books and Roll Forward

Once all adjustments, reconciliations, and reviews are complete, you can officially close out the books for the year. This means finalizing all financial records and preparing for the new year. Many accounting systems allow you to “lock” the financial period, preventing further entries or adjustments.

Action Points:

• Make final journal entries to close the books.

• Lock the accounting period to prevent further adjustments.

• Roll forward balances into the new financial year.

  
  

Conclusion

Completing the year-end financial close can be a daunting task, but with a clear checklist in hand, you can ensure a smooth and efficient process. By following these steps, your business will be better prepared to face the new year with accurate financial records, streamlined tax filings, and a clear understanding of your financial position.

Whether you’re a small business owner or part of a larger organization, following a structured approach to the year-end close can save time, reduce errors, and provide valuable insights for future growth.