Table of contents
Key takeaways
- Year-end close is essential to successful and secure financial management.
- The year-end closing process includes collecting documentation, such as financial records, income statements, credit card statements, cash flow statements, and financial transactions, to create an annual financial statement.
- A combination of modern technology and best practices can streamline the process.
It's the moment we've all been anticipating. What we in finance have been building up to all year: year-end close.
By now, you've likely mastered your month-end close. But a year-end close is a much larger endeavor. Not only is this your final chance to accurately reflect your fiscal year activities, but it is also the precursor to the upcoming audit season.
More than 82% of finance teams find month-end close to be a negative experience — and we imagine that closing 12 of them isn't considered more enjoyable. Following the right workflows for your remote year-end close is key to making the process as efficient as possible. Below are four tips to do just that.
What is the Year-End Close?
The year-end close is the process of completing all transaction documentation for the year, and it’s a tedious process. It can take finance teams up to 25 days on average to finish the process. When accountants close the books for the fiscal year, they have to review, reconcile, verify, and calculate the cash flows for the entire year. At the end of the process, they will produce a financial statement that can be used in internal and external audits.
Why is the Year-End Close Necessary?
Year-end close is intense, but it is critical. It ensures key financial-data like accounts receivable—is accurate, complete, and ready for audit. With the annual financial statement, the company can easily review spend and revenue, use it in external audits, and strategize for the next year.
Key Steps in the Year-End Close Process
How complex your close is depends on the size of your company and how many transactions you process. That said, most processes have the same general steps:
- Reconcile all financial documentation
- Finalize journal entries and adjust when necessary
- Collect tax documentation
- Generate and store financial statements and similar documentation
Common Challenges to Closing the Books
One of the reasons year-end close can take so long is the mistakes and errors that can happen throughout the year. Incomplete, inaccurate, and missing documentation are just a few of the issues accountants can face.
Manual reconciliation errors, legacy systems, and short turnaround time can all severely impact the process and increase the likelihood of inaccuracies.
Five Best Practices for Remote Year-End Close
The best way to combat issues and hold-ups in the year-end process is a proactive approach to accounting. Below, we’ll cover five best practices that will speed up your close process without sacrificing accuracy or transparency.
1. Keep the dialogue going
Zoom fatigue is real, and we understand the temptation to treat your year-end close as a task limited to select individuals within your company.
But in a remote environment, communication is extremely important. And it comes from the top. “Communication is the responsibility of the leader, not the led,” says Peter Nesbitt, VP of Finance at Teampay. “Over-communicating needs to happen when you don’t have in-person communications.”
Remote employees can’t physically walk over to your desk to ask a question or quickly touch base, which could lead to misalignment. Instead, set up virtual check-ins and working sessions to help ensure that team members stay on track with their specific tasks during the close.
Make sure each meeting has a clear agenda, as well as action items you are hoping to walk away with. Send those out prior to the call, and share the notes mapped back to the agenda and action items afterwards.
2. Support your team
Year-end close is stressful, often marked by long hours at work for the finance team. Simply ensuring that they can access the information they need, when they need it, is the first step toward reducing friction.
The same goes for employees outside of finance. While they might not be feeling the impact of year-end close specifically, most employees do have to work with finance at some point. And they may find it a stressful experience.
Nearly all employees regularly make business purchases, not only the central procurement department. This often means finding a shared corporate card, submitting expense reports and receipts, and/or chasing someone else down to buy something on your behalf.
It’s a complex process, and it’s easy for employees outside of finance to mess up: accidentally spending out-of-bounds, filling out their expense report incorrectly, or forgetting to send in a receipt.
By giving employees a central hub to request funds, receive payment methods, and submit receipts, finance teams can make the purchasing process clear and accessible by all employees, wherever they are. Automatic rules and alerts ensure compliance and make it easy for employees to do the right thing.
This reduces your guesswork during year-end close: no more back-and-forth with employees to try to figure out who bought what and why; no more chasing down employees for receipts; and no more reversing your balances when you realize that employees spent more than they should have.
3. Start earlier than you think
Traditional accounting cycles require finance teams to wait until the end of the month to know how much has been spent across their organization. They often find themselves looking in the rearview mirror, conducting analysis using last month’s numbers.
Finance teams need real-time visibility to truly understand spend activity across the company. By enabling automatic reconciliation in QuickBooks, NetSuite, or Sage Intacct immediately post-transaction, they can see accurate information at any time and adjust accounts as necessary, instead of reversing your balances at the end of the year. This allows finance teams to achieve a kind of continuous close, rather than saving all the hard work for the end of the year. This also gives teams more time to review and validate balance sheet accounts, ensuring that assets, liabilities, and equity are accurately represented before final reporting.
More than 60% of finance professionals say they have to conduct “best-guess accounting” during their close. Distributed spend management software proactively collects spend data, ensures pre-approvals, and requires employees to code purchase requests upfront. By proactively answering questions about transactions, this system eliminates manual guesswork and frees your team from frustrating back-and-forth. This can save a lot of time when January hits.
4. Automate as much of the process as possible
Year-end close is often characterized by long days of tedious manual work - but it doesn’t have to be. Distributed spend management software automates the reconciliation process in most major accounting systems. It ensures transactions are posted correctly to the general ledger, eliminating manual data entry errors and improving audit readiness.
Integrations with QuickBooks, NetSuite, and Intacct allow purchase data to be automatically passed through to your accounting software in real time.
This means that manual data entry is a thing of the past. Transaction data is transmitted to your accounting system, correctly coded. By taking over the grunt work, automation software allows your team members to focus their energy on more valuable tasks.
Further, strategic and automated reconciliation is conducted in real-time, which supports a more continuous close. Real-time reconciliation gives finance teams full transparency into all the spend happening across their company now, not just the spend that happened last month.
Distributed spend management software proactively controls spending, enables real-time visibility into spend data, and automates reconciliation. The reduction in manual tasks will lead to significant time savings, which you can use to develop a strategy and deliver valuable insights to stakeholders.
5. Take time to review and optimize
Closing the books isn’t just about closing the books. Once the hard work is done, it’s time to review and optimize the process for next year.
Ask yourself:
- What took the most time to complete?
- What roadblocks did I encounter?
- What do I need to speed up the process?
By opening up the conversation, finance teams can explore ways to modernize their processes going forward. Tools such as distributed spend management software can help set your team up for success in the upcoming year.
Simplify Your Year-End Close
Financial reporting benefits enormously from automation, as it reduces manual errors and speeds up data consolidation. The easiest way to accelerate closing is simply not to do the work. That’s where automation comes in. Companies that streamline transaction reconciliation and reporting can dramatically reduce time spent on manual entry. Automated spend management platforms, when combined with these best practices, make annual reporting a cinch and free up time for more high-value tasks.
Paystand’s accounts payable platform, Teampay, empowers teams with in-depth spend reporting analytics. All documentation is available with the click of a button, helping the finance team close books faster.
Discover how easy reporting can be with our granular analytics features.
