Your 2023 Year-End Close Preparation Checklist

Accounting teams everywhere are about to enter peak season. Month-end close, quarter-end closes, and the end of the fiscal year all coincide in a stress-inducing sprint to kick-off the year.

New resolutions to hit the gym or meditate weekly? Likely out the window as the team mad-dashes to wrap up everything involved in the year-end close.

Some good news — while we can’t take all of the work out of the month-end close (hey, we’re trying!), we can get your team started on the right foot with a complete year-end close checklist. Downloadable template here.

What is the year-end close?

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For our seasoned accountants out there, feel free to skip ahead. You know the drill. For anyone experiencing a year-end close for the first-time—

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The year-end close involves a thorough examination, reconciliation, and confirmation of all financial transactions and elements within the company's ledgers for the previous fiscal year, ensuring everything is accurate and complete.

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While ideally across the year your team has been diligent about accounting practices that reduce work now, inevitably most teams have additional adjustments to make as time has passed. 

For most teams, the ultimate goal of a year-end close is to produce final financial statements for a potential audit and to deliver a comprehensive picture of the previous year to the business.

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Your Year-End Accounting Checklist

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Before we jump in, a reminder for those procrastinators-at-heart reading this, the best practice is to perform most of these things across the year, or at least quarterly.

That being said, we have empathy for early stage and small business accountants where that’s simply not realistic and many of these steps are tackled only once per year. We’ll admit, we too tried to cram the 20 books we said we’d read in 2023 in December. 

So, what’s involved in a year-end close? 

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1. Mise en Place: Prepare For Your Close 

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Ahead of drilling into the work of the year-end close, we’ll borrow from expert chef advice to mis en place (ex. Lay out your whisk, bowls, and measured ingredients before jumping in) for better cooking. We recommend: 

• Create a folder labeled “2023 Year End Close” to house all relevant documents across the close, including your eventual income statement, cash-flow statement, and balance sheet.
• Lay out a close schedule with key deadlines for the team, including reporting timelines, upcoming vacations, and milestones to keep your team on track. 
  
  Pro-tip: For teams using Numeric, take advantage of marking tasks as “dependencies” to outline what will potentially be blocking other tasks. 

• Get ahead of external asks. After reading through the below list and modifying for your business, highlight anywhere you’ll need input from another department. Given that this time of year can be hectic for all teams, make these asks as early as possible and build in buffer room for inevitable delays. 
• Touch base with your audit team. Before finalizing your year-end it is helpful to touch base with your audit firm to ensure you have a plan to address some of the areas that will be of key importance to them. They can also provide useful guidance on new or upcoming accounting pronouncements that can sometimes result in practical expedients that make life easier.

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Pro-tip: Keep a running shared Google Doc/Word Doc of all inefficiencies your team spots and major adjustments that were made over the course of the year-end close accounting process. When it’s time to retro the close, you’ll have this list to skip straight to solutions and improvements for the upcoming year.  

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2. Short-Term vs. Long-Term Reclasses

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Now into the weeds. One of the most common year-end close items is short-term and long-term reclasses, which are key to ensuring proper balance sheet presentation. 

Certain agreements have a current portion (within the next twelve months) and a long-term portion (to be recognized or due more than twelve months from the balance sheet date). 

The usual suspects here are debt and lease liabilities. 

• Debt: Ensure the principal portion of debt due within the next twelve months is presented with current liabilities. The remaining debt obligation should be presented within long-term debt. 
• Lease liabilities: Similar to the debt example above, the portion of lease liabilities coming due within the next twelve months should be presented within current liabilities. 

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One more category that’s often overlooked:

• Prepaid Expenses: Some companies prepay contracts for greater than 12 months. If any of the prepaid amount will be recognized more than 12 months from year-end, you’ll need to book a reclass to a long-term asset account. 

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Pro Tip: Set up annual or custom task frequencies in Numeric to remind you when it is time to review these accounts for short-term vs. long-term presentation matters. 

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3. Year-End Accruals

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For most companies, employee costs and audit fees are often an area where additional accruals or considerations might be necessary come year-end. 

Employee Costs‍

• Bonuses: If bonuses are earned in the current year, but paid out in the subsequent year’s payroll run, an accrual will be needed at year-end to capture the cost in the correct period. 

• Severance: If employees are let go, you will need to accrue for the total amount of severance in the period in which they sign their termination paperwork.
  This is due to the fact that they will no longer be providing services so you’ll need to record all that cost immediately. Keep in mind that you’ll also need to accrue any additional benefits that may have been granted (e.g., covering COBRA payments for X # of months).
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Professional Service Fees

• Audit Fees: Depending on the company, some prefer that their audit fees are accrued to the period in which the audit relates. It's worth discussing with your audit firm their expectations or preferences. 

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4. Reconcile Key Accounts, Starting with Cash, Accounts Receivable, and Accounts Payable

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Warning: this is the part where stress levels can rise. To prevent reconciliations from being overwhelming, first group your accounts into “key” and “non-key”. By isolating those that are material to your business, you’ll focus your time on what’s most important. 

What typically are key accounts to reconcile? We’ve listed common examples below.

Cash Accounts: Ensuring you have up-to-date cash reconciliations is a critical part of the monthly close and also makes for a much smoother audit. Any differences between your book balance and bank balance should be clearly documented and highlight the specific transactions causing the variance. 

Pro-tip: Don’t do this by hand, automation can help here. Automate bank statement reconciliation using AI, drop in your bank statement, Numeric will scan your statement, pull key details and then let you confirm your GL balance agrees. 
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Accounts Receivable: Ensure you know what invoices are outstanding, make sure there are no unapplied payments, and check for any customer overpayments which should be reclassed to liability.
‍Accounts Payable: Verify that your accounts payable aging report is up to date and there are no unapplied payments for vendors and no debit balances sitting in accounts payable that could represent a prepayment (and needs to be reclassed to an asset account - likely prepayments).

Deferred Revenue: Book any necessary revenue adjustments at year-end to capture adjustments for cutoff or other year-end analyses your team must first perform to close revenue. Reconcile your subledger of deferred revenue by customer or contract to your ending GL balance.
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5. Reconcile Accrued Expenses, Prepaid Expenses, and Fixed Assets

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Even more reconciliations in store. Dependent on your business, you’ll want to consider reconciling: 

Accrued Expenses: Review your accrued expenses account, keeping an accurate record of what makes up your accrued expense balance by vendor is key to helping auditors make selections and will help you identify potential over/under accruals. 

Prepaid Expenses: Depending on the company, this could be a very large (or “material”) balance. For this reconciliation, it’s most helpful to have the list of specific invoices and the waterfall of how the deferred expense on the balance sheet will be recognized. Need help with prepaids? Use our prepaid expense workpaper here.

Fixed Assets: Depending on your company and capitalization threshold, the accuracy of the fixed assets balance may represent a significant risk. In that case, it's important to ensure your subledger is reconciled to the balance sheet by listing out all the specific assets, identifying criteria (e.g., serial numbers), useful lives, placed in service date and a depreciation waterfall. 

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6. Reconcile Debt, Leases, and Equity 

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Debt, leases, and equity are some of the thornier accounting areas and can slow down an audit if not fully tied out. 

Given the complexity with these accounts, this is an area we often see accounting teams leaning on technical accounting assistance to chart the right path forward given their company specifics. For scaling tech companies with questions, we typically recommend to our clients choosing firms with experience in their industry, like PCG. 

‍Debt and Leases: Make sure the underlying schedules reconcile to your ending balance sheet amounts and that current vs. non-current reclasses are recorded.

Equity: Par, APIC, and Preferred Shares are often an area that can slow an audit if not fully tied out. 

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7. Technical Analyses 

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In addition to monthly closing activities, there are often a lot of business events requiring more complex end-of-year accounting.

Financing Analyses 

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Debt: If a company raised new debt, then a new debt schedule capturing any debt discounts or issuance costs will be needed. The effective interest rate method rather than straight-line recognition of these costs is also needed. Pay attention to embedded features.

Equity: It is important to have the right classification of equity as well as track all the issuance costs.

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Other Analyses

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Leases: Setting up lease schedules under ASC 842 can be time consuming, but it’s important to make sure they are recorded before closing the books for the year.

Capitalized Software: If applicable, consider your software development during the year and whether any releases during the year represent potentially capitalizable work. Need help with software capitalization? We covered core principles and built a template here. 

Impairment Analysis: For companies with goodwill and intangible assets, an impairment analysis is generally required at least annually (or more frequently if there are discrete triggering events) to determine if an adjustment is required to the carrying values of those assets. 

Stock-based Compensation: For companies that offer equity grants (stock options, restricted stock awards, etc.), ensure you’ve calculated your stock-based compensation expense using a recent 409a valuation report. Be cognizant of any unique terms (e.g., non-service based vesting) in your agreement that might require a more in-depth analysis. 

Policy Updates: If there were any changes to the business (e.g., new revenue streams, acquisitions) it is important to update policies to reflect the current recognition methods.

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8. Tax Planning & Book-Tax Differences

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For many teams, year-end is also when they focus on tax planning, analyzing the financial position of the business, relevant deductions, and exceptions. 

Given tax law is different from book reporting requirements, book income and taxable income can differ. After reading through common book-tax differences, many accounting teams consult with a tax preparer.

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9. Year-end Retrospective

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Across the year-end close process, you’ve likely made adjustments in several areas, spotted errors or oversight, or identified gaps in policy or documentation. Before wrapping a ribbon and bow around your year-end close, take those learnings to save time in future years. 

• What was unclear during the close? Take time to draft documentation, shoot a loom video, or create a Q&A doc. If you’re using Numeric, leave detailed task descriptions for the future with bulleted or numbered lists, loom videos, and all of the information future team members will need.
• How long did the entire process take? Use this to benchmark going forward as you adopt improvements and for planning next year’s close.
• Were deadlines met? If deadlines were missed or completed right before the buzzer, consider adopting a free close management software to keep things on track. 
• What took longer than expected during the close? If one item was getting through reconciliations was exhausting, consider accounting software to help automate much of the work involved in reconciliations. 

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Pro-tip: Notice a pattern in any adjustments made during the year-end close? Use those data points to improve your accounting system as a whole. Create monitors with Numeric (ex. transactions above a threshold not tagged to a vendor) to proactively catch similar issues moving forward on an ongoing basis. Your 2025 self will thank you. 

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How Numeric Can Help with the Year-End Closing Process

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Year-end closes are stressful. For accounting teams using Numeric, they’re manageable. 
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Accounting teams using Numeric hit year-end close deadlines.

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With task management purpose built for accounting, accounting leaders manage the year-end close with less stress and more visibility. 

Label tasks as dependencies for others, manage tasks around your holiday schedule, set up slack and email alerts for outstanding items. 
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Accounting teams using Numeric have less work at year-end.

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Automated reconciliations quickly bubble up why your GL and workpaper or bank statements aren’t tying out and reduce manual data entry.

Monitors and alerts flag real-time transactions from NetSuite that may be off or require adjustments, enabling accounting teams to shift more of the work across the month for a more continuous close. 

Lightning-fast search and reporting from your GL data avoids the headache of complicated queries in NetSuite. Search and filter to find the transaction or data points you need within seconds. With included comment and edit access for the FP&A team, the finance team easily accesses the data they need for their package of financial reports.

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Get started with Numeric’s close management tool for free or set-up a call to discuss how we can help streamline your accounting in the new year.