As the year draws to a close, businesses of all sizes face the annual ritual of the year-end close. This critical accounting process involves more than just crunching numbers and balancing books; it’s a strategic endeavor that can significantly impact a company’s financial health and compliance.

Here are 10 essential accounting best practices for year-end close of business. They offer valuable insights and practical tips to help organizations navigate this complex and crucial period with precision, efficiency, and confidence. Whether you’re a startup or a large, established corporation, mastering these best practices will empower your business to thrive in the year ahead.

1. Lock down closed months in your accounting system as you progress through the year to ensure no one enters transactions or journal entries into prior months that have already been reviewed, approved, closed and published in financial statements to management.
2. Ensure Form W9’s are complete and on file for all vendors that need to receive a 1099.  This is a process that can easily be done during the year (preferably as new vendors are added) so you are not scrambling in January when you are in full year-end closing mode and on tight deadlines.
3. Create a checklist of tasks and responsibilities (like those listed here). Assign to specific personnel with deadlines.  Review with your team before and during the year-end closing process to ensure you are on track.
4. Perform a sales cut-off review.  Ensure all sales before year end are billed and included in current year sales.  Ensure sales made early in the following year are properly excluded from the prior year’s sales.
5. Closely review all overdue accounts receivable at year end.  Contact customers to collect overdue balances and send delinquent accounts to collections.
6. If you have inventory, do a complete physical count at year end.  Adjust the inventory value on the books to equal the physical counts on hand.
7. Ensure all current year vendor invoices are received and accounted for.
8. Do a search for unrecorded liabilities by reviewing bills paid early in the following year to ensure any that pertain to the prior year were properly accrued for at year-end.
9. Reconcile all balance sheet accounts.  If your balance sheet is clean and reconciled, your income statement should be simple.
10. Perform an analytical review of your year-end financial statements.  Compare the current year to the prior year and to the budget.  Investigate any changes that exceed your tolerable threshold.  Ensure all final differences are substantiated and make logical business sense.

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If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Darien) or email us at info@cironefriedberg.com.