As the calendar turns over to a new year, your organization’s focus is normally on the adventures and challenges that await. Yet, there’s also the need to report on the financial results of the prior year. This generally includes interacting with your CPA. This fine professional, who supports the organization, has this habit of mentioning something called a “year-end close”. What does this mean?

A year-end close is a set of procedures that provides your organization with a level of certainty that the financial records for a year are correct. Typically, an organization provides their accounting records to the CPA through a QuickBooks file. The CPA may need to make adjustments to make the records correct for the financial statements and/or tax filing. Unfortunately, this means that the year-end financial reports submitted to the organization’s board of directors are not correct until all adjustments are made. Year-end close procedures can minimize the number of adjustments your CPA needs to make, reducing the overall time it takes and improving the timeliness in delivering correct financial reports to management.

What’s included in a year-end close? Here are several ideas to get you started:

Print out the balance sheet (or statement of financial position).
This provides your organization a starting point to examine accounts for correctness. Go through the balance sheet and ask, “Is this item correct?” Make sure the year-end balance in each account is reconciled and can be supported. You can always seek counsel from your CPA to assist you.

Print out subsidiary accounts payable and accounts receivable reports. QuickBooks and other accounting software have separate “modules” to account for payables and receivables. Reports from these separate systems can provide immediate feedback regarding the accuracy of the amounts shown in the balance sheet.

Confirm that beginning net assets are correct. Your prior year-end financial statement and/or IRS filing will provide you the ending net assets for the prior year. This should also be the beginning balance in the year that you are closing. If those numbers don’t match, then additional work is necessary to adjust the financial records.

Compare your income statement (or statement of activities) to prior year. Make sure that any changes within your income statement accounts from prior year are consistent with your expectations based on how the year went. If an account is much higher or lower than you might expect, then there’s a good chance some adjustments may need to be made.

Lock down the year. When you’re finished with the year-end close, it’s a good habit to use the software’s capability to lock out any further changes in the year that was closed.

These are just some ideas to include in a year-end close. If you wish to discuss this further, we are always happy to provide guidance and tools to assist your effort. Happy closing!