With the end of 2024 rapidly approaching, now is the time to ensure your organization’s financial records are accurate, compliant, and ready for the new year. Proper planning and a structured approach are essential to avoid last-minute scrambles and ensure financial reporting accuracy.
Here are the key steps you need to leverage to have an efficient, accurate year-end close.
Create a Checklist and Schedule
The first step to a successful year-end close is creating a detailed checklist and schedule. A comprehensive checklist helps your finance team track each task and ensure it doesn’t overlook any critical steps. This list should include key dates, task owners, and dependencies.
Imagine you need to perform accounts payable reconciliations. However, your ability to complete AP reconciliations may depend on the completion of other tasks, so organizing work in a logical order is essential.
Make sure your checklist and corresponding schedule are realistic. Provide ample time for each task, and give your team enough leeway to handle any unexpected issues. By setting internal deadlines leading up to December, your team can ensure adequate time for review and adjustments.
Gather the Necessary Documents
Having all necessary documentation readily available will promote an efficient year-end close. Without proper documentation, the process can stall, increasing the risk of mistakes and delays.
Begin by gathering financial statements, payroll reports, and any other relevant information. Ensure all supporting documentation for major transactions, such as loans, investments, and large purchases, is organized and accessible. This will save time and effort when auditors and stakeholders ask you to verify the details of any transactions.
Coordinate with other departments, such as legal or sales, to obtain any necessary records or approvals. For example, the HR department can assist with payroll information. Early communication and coordination help avoid delays due to missing information.
Review AR and AP
The year-end close is a prime opportunity to review your AR and AP balances to ensure accuracy and completeness. Start by analyzing outstanding invoices and payments. Verify that all revenue earned in 2024 has been recorded. This step assists in assessing cash flow and financial health.
Your team will also need to review any outstanding supplier invoices and verify that all expenses incurred in 2024 have been accurately recorded, even if they remain unpaid. Accruing expenses accurately will promote financial reporting accuracy and ensure costs are documented in the period in which they were incurred.
Collect on Past-Due Invoices
Reach out to your trade partners and clients to settle any past-due invoices. Develop a plan to follow up on all past-due invoices. You may need to send out reminders or offer discounts for prompt payments.
If necessary, consider factoring opportunities or work with collection agencies to settle severely overdue accounts. You want to recapture as much lost revenue as possible before transitioning to 2025.
If specific receivables are deemed uncollectible, write them off. Writing off bad debts provides a more accurate representation of your AR and helps avoid overestimating income.
Reconcile Your Books
Book reconciliation represents one of the most critical and time-consuming steps in the year-end close. Prioritize bank reconciliations to verify cash balances. Compare your internal ledger with bank statements to identify discrepancies, such as unrecorded deposits.
You’ll also need to reconcile loans and credit cards to ensure all of the organization’s liabilities are accounted for.
Count and Value Your Inventory
If your organization manages physical inventory, it’s vital that you have an accurate valuation of all stock. Now’s the time to conduct a physical inventory count to confirm the inventory levels documented in your database.
Determine the method of valuation (i.e., first-in, first-out or last-in, first-out) that best reflects the value of your inventory. Accurate inventory valuation impacts your cost of goods sold and gross profit calculations, affecting both the income statement and balance sheet.
Assess Payroll Records
Finally, you’ll need to thoroughly review your payroll records. Payroll errors can lead to significant legal and tax issues. Now’s your last chance to catch and correct any discrepancies before they create additional financial challenges for your business.
Verify year-to-date payroll records for accuracy. Ensure all salary payments, deductions, taxes, and benefits are correctly recorded. Verify each employee’s information so that you can issue W-2 forms for employees and 1099 forms for contractors in a timely manner.
Set the Stage for a Successful 2025 With a Smooth Year-End Close
A fast and efficient 2024 year-end close will lay the foundation for a smooth first quarter of 2025. You need a clean slate to kick off the new year so that you can focus on promoting your organization’s financial health and ensure operational stability.
Following these steps will help you deliver an efficient year-end close that supports strategic planning and business continuity.
