Closing the Books: Best Practices for Year-End Close

The end of the year is upon us, which means it’s time to start stuffing stockings, lighting candles, and of course, examining and updating your accounting books.

The year-end close is the process during which businesses review their financial records and identify any issues at the end of the fiscal year.

This form of annual reporting stands as a resource for organizations when establishing budget, long-term, and short-term goals. With this financial data, organizational leaders can make informed decisions to greatly benefit their company – but it all starts with accurate reporting.

There are multiple aspects of year-end close that must be considered when finalizing your company’s financial assets at the end of the fiscal year.

The year-end close process includes:

• Adhering to legal/government regulations

• Modifying journal entries

• Preparing financial statements

• Balancing accounts

When accountants have these benchmarks in mind, they can enjoy several benefits associated with a successful year-end close.

The year-end close process can help organizations improve and optimize their operations in several ways – not only can it identify areas for improvement throughout the financial process, but it also helps decision-makers determine areas to allocate resources. This ultimately enhances the overall financial performance of the entire business.

The year-end close process ultimately confirms the accuracy of an organization’s financial reporting for the entire fiscal year – giving leaders and decision makers a crystal-clear view of the business’s financial performance and health. Financial data is verified, and accounts are reconciled during this process, ensuring that the company is complying with accounting standards and regulations.

As we’ve discussed, the year-end close process is essential for future financial planning and budgeting. This level of reporting allows leadership to make informed decisions based on reliable data – highlighting potential problems, trends, and areas primed for growth - a huge help when planning for the next year.

Now that you know why year-end close is critical for your company, do you know how to do it properly? Let’s talk about it.

Businesses must keep accurate financial reporting data for proper planning and decision making, but the year-end close process is known to be both time-consuming and complicated.

Lucky for you, BlackLine is on your side - and we’ve listed out the most important steps to take during your year-end close process:

They say preparation is the key to success, and when we’re talking about closing your financial records at the end of the fiscal year, they couldn’t be more correct. If you operate throughout the year with your year-end close process in mind, you can save a lot of time and stress come the end of Q4.

As you manage your financial data throughout the year, keep these tasks in mind:

• Understanding applicable tax deadlines and implications

• Analyzing your organization’s tax duties

• Auditing and verifying financial data (which you should have been doing every step of the way)

• Taking advantage of the applicable tax credits and tax deductions
  

Now that you’ve been keeping accurate records and a close eye on your company’s financial data for the entirety of the fiscal year, it’s time to conduct an in-depth financial review.

This review should consist of the following tasks:

• Analyzing revenue and expenses

• Evaluating asset and liability statements (receivables, payables, loans, and inventory)

• Discovering and correcting anomalies

Through this detailed financial analysis, you will be empowered to identify opportunities for growth and savings in the next year, as well as fix inconsistencies that arise in your organization’s liability and asset accounts before you prepare your financial statements.

Next, it’s time for the account reconciliation phase. During this step, you’ll take care of the following:

• Reconciling your bank statements

• Reconciling your general ledger statements

• Correcting any errors found in statements

To guarantee the accuracy of your bank statements, you should check them against your internal records and correct any abnormalities as soon as possible. Next, you’ll continue the process with your general ledger entries, checking them against your internal records for accuracy and correcting discrepancies that arise.

As a rule of thumb, organizations ensure that their financial reports are 100% accurate and compliant with regulations by reconciling the general ledger.

Now let’s get those financial records ready.

Your financial records are a clear indicator of your company’s financial health, which is significant for both internal and external stakeholders – decision makers and executives, as well as investors and clients alike.

You’ll need to create both an income statement and a balance sheet. Your income statement reports how your company performed during a specific period (in this case, the last fiscal year), entailing your revenue and expenses. Your balance sheet reports what a company owns at a specific point in time (in this case, the end of the fiscal year), consisting of liabilities, assets, and equity.

Together, these financial reports provide a high-level overview of your company’s financial health, liquidity, and growth opportunities.

Finally, you need to ensure your reporting is compliant with all accounting regulations and tax considerations. This last step consists of the following tasks:

• Understanding applicable tax deadlines and implications

• Analyzing your organization’s tax duties

• Auditing and verifying financial data (which you should have been doing every step of the way)

• Taking advantage of the applicable tax credits and tax deductions

Once you have completed these steps and are fully in compliance with all applicable regulations, you should be prepared to complete your financial reports accurately and in a timely manner.

The year-end close process is essential in keeping your organization ahead of any budgetary/financial challenges that may present themselves. Not only are these financial reports critical to maintaining a business’s financial stability, but they are the most important tool decision-makers and executives could use to plan for the next fiscal year.

Want to make your year-end close process as simple as possible? Check out this close management solution that’s saving businesses time, stress, and money across the board!