Year-End Close Checklist for Growing Businesses

Pre-Close Preparation (Start December 15)

Notify Key Stakeholders: Inform departments about year-end cutoffs and documentation requirements

Review Accounting Policies: Ensure consistent application of revenue recognition, expense matching, and depreciation methods

Prepare Supporting Schedules: Compile fixed asset registers, prepaid schedules, and accrual worksheets

System Backups: Ensure all accounting data is backed up before beginning close procedures

Account Reconciliation (Days 1-5)

Cash and Bank Accounts

Reconcile all bank statements to general ledger cash accounts

Investigate and resolve outstanding reconciling items

Confirm all deposits in transit and outstanding checks

Verify petty cash funds and document any shortages

Accounts Receivable

Age all outstanding invoices and review for collectibility

Write off confirmed bad debts and update allowance for doubtful accounts

Confirm year-end revenue cutoff - ensure December sales are properly recorded

Review credit memos and returns for proper period matching

Inventory (If Applicable)

Conduct physical inventory count or cycle counts as of December 31

Value inventory using consistent costing method (FIFO, weighted average, etc.)

Write down obsolete or slow-moving inventory to net realizable value

Ensure proper cutoff for goods in transit and consignment inventory

Fixed Assets and Depreciation

Update fixed asset register with all additions and disposals

Calculate and record depreciation expense for the full year

Review for impairment indicators and write down impaired assets

Verify that capital vs. expense classifications are correct

Accounts Payable and Accrued Expenses

Match all outstanding purchase orders with invoices and receiving reports

Accrue for goods/services received but not yet invoiced

Review and accrue for payroll, benefits, and payroll taxes

Accrue for professional services, utilities, and other recurring expenses

Adjusting Entries (Days 6-7)

Prepaid Expenses

Review and amortize prepaid items:

• Insurance policies
• Software subscriptions
• Rent payments
• Professional memberships

Deferred Revenue

Recognize earned revenue from:

• Customer deposits
• Service contracts
• Maintenance agreements
• Gift card sales

Accrued Income

Record earned but unbilled revenue:

• Work in progress
• Interest receivable
• Rent receivable
• Commission income

Tax Provisions

Calculate and accrue tax liabilities:

• Federal income tax
• State income tax
• Sales tax payable
• Property taxes

Financial Statement Preparation (Days 8-9)

Balance Sheet Review

Assets Section: Verify all assets are properly classified as current vs. non-current, and that allowances for bad debts and depreciation are accurate.

Liabilities Section: Ensure all known obligations are recorded, including accrued expenses and contingent liabilities.

Equity Section: Verify retained earnings roll-forward and any distributions or capital contributions are properly recorded.

Income Statement Analysis

Compare monthly revenue patterns for unusual fluctuations

Review expense categories for proper classification and timing

Analyze gross margins and investigate significant variances

Verify all one-time or extraordinary items are properly disclosed

Cash Flow Statement

Reconcile operating cash flow to net income

Document all investing activities (asset purchases/sales)

Include all financing activities (loans, distributions, contributions)

Verify ending cash balance ties to balance sheet

Tax Preparation and Compliance (Day 10)

Federal Tax Preparation

Prepare depreciation schedules (Form 4562)

Calculate Section 199A QBI deduction eligibility

Review R&D capitalization requirements (Section 174)

Document business entertainment limitations

State and Local Compliance

Review nexus requirements in all operating states

Calculate apportionment for multi-state operations

Prepare annual sales tax reconciliations

Review local business license requirements

Payroll and Employment Taxes

Prepare W-2s and 1099s for year-end filing

Reconcile payroll tax deposits to annual returns

Review contractor classifications (Form SS-8 if needed)

Calculate FUTA and SUTA liability

Documentation and Support

Organize receipts and supporting documentation

Document all tax positions and estimates

Prepare tax provision to financial statement reconciliation

Archive digital copies of all tax returns and support

Common Year-End Pitfalls to Avoid

Revenue Recognition Errors: Ensure December sales are properly cut off and subscription revenue is correctly deferred.

Missing Accruals: Include all expenses incurred but not yet invoiced, especially recurring services and payroll.

Inventory Valuation: Apply consistent costing methods and write down obsolete inventory to avoid overstated assets.

Tax Estimate Shortfalls: Accurately calculate tax provisions to avoid cash flow surprises at filing time.

Next Year Planning

Improve Monthly Close Process

Identify bottlenecks from year-end and implement monthly procedures to prevent issues next year.

Automate Routine Entries

Consider automation for depreciation, accruals, and allocations to reduce manual work.

Enhance Documentation

Create procedures manuals and checklists to ensure consistency and reduce reliance on individuals.

Plan for Growth

Assess whether current systems and processes will scale with projected business growth.

Key Success Factors

Start Early: Begin preparation in mid-December to avoid year-end rush and ensure thorough review.

Stay Organized: Maintain detailed checklists and document all significant adjustments and estimates.

Involve Experts: Engage your CPA early for complex transactions and tax planning strategies.

Review and Learn: Conduct post-close analysis to improve processes and reduce time for next year.

Need Expert Help with Your Year-End Close?

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