The Year-End Close Process: Trading Chaos for Order

In ancient Babylon, the days between the Winter Solstice and the New Year were considered to be a time of struggle between Chaos and Order, with Chaos trying to take over the world. For today’s financial department and its accounting staff, as the calendar signals the time to get ready to perform myriad year-end close activities and prepare for audits, it may feel as if Chaos will indeed prevail.

While outdated New Year superstitions and beliefs have morphed into more modern views, the fact remains that many organizations continue to complete their close process in a way that is, in a word, outdated.

Still, there are a few simple techniques to transform year-end close chaos into a manageable, repeatable and well-controlled activity. The addition of efficiency boosting practices can only bring everyone closer to the common end goal: a close that is shorter, more accurate and audit-ready, without the long hours and stress that typically accompany the process.

Consider these four areas, where with just a little foresight and planning, the year-end close can shift from the ancient to the advanced.

People: Smart Staffing for the Close Squad

Simply nothing gets accomplished without the key players on a close squad; but how often do you stop and consider roles, skills and responsibilities relating to the individuals who comprise your group? The tasks around close activities are varied and wide-ranging, and logically, so should the people on your team who will be assigned to accomplish them.

As you staff, don’t overlook differing work styles, and always place cultural fit within your organization above resume credentials alone. Not every assignment requires a CPA, and in fact some year-end close tasks, such as obtaining PBC information for audit readiness, are probably better suited to a more junior staff member. And, while it is important to apply expertise and certifications where they can be best leveraged, it’s still critical to encourage (and require) folks to learn and experience close processes that are outside of their normal responsibilities. New internal staff views on accepted procedures can often deliver more return than just simple step level process refinement.

Once you’ve got a well-oiled close team in place, don’t neglect nurturing and continued training that will only benefit your organization and the individual via lowered attrition and heightened skill sets. CPE studies should be mandatory, and in addition to cross training internally, well-chosen industry events will enhance close processes through exposure to innovations developed by other visionary organizations. Lastly, don’t forget rewards for the accomplishment of a successful close, whether it be on a monthly, quarterly or annual basis.

Close Processes: Create and Refine, then Repeat

Well-defined close processes ensure that there are both repeatable and well documented workflows, delivering the peace of mind that all tasks have been tackled and successfully completed by their responsible parties. They also provide reference points and codified roadmaps in the event staff changes occur, which is virtually inevitable.

Probably the most valuable and time-investment worthy assignment is to compile a comprehensive close checklist. Many organizations will already have a checklist in place, but for those who do not, it’s time to divide and conquer. Canvas staff to understand what lists already exist; even smaller organizations have “cheat sheets” typically crafted by individuals charged to ensure that their specific tasks have been fulfilled. It’s time to consolidate, evaluate and collaborate to make sure the most complete and efficient checklist becomes an integral and dynamic part of your regular routine. To get you started, click here for a best practice close checklist.

There are several other straightforward best practices, from a process standpoint, that can help expedite the end goal of repeatable and predictable close routines. First, group accounts (i.e. cash) and give them unique identifiers. Nothing fancy, just so that the IDs are descriptive and easily identifiable by team members. This will cut down on both confusion and the need for redundant communications during the hectic close window.

Next, consider a T-plus/T-minus system for simple roll forward/roll back of actual close dates. Be sure to articulate deferred soft close specifics for flagging those quarterly and annual close dates.

Finally, hold a post-close meeting to identify areas where improvements can be made. An effective method can be to select one specific process that needs enhancement, and to then set a goal of the next period to complete agreed upon improvements.

Documents: A Monthly Focus Delivers Year-end Benefits

A swift and accurate annual close really is the compilation of a year-long process, one where needed supporting documents and records are organized and accessed in a logical and structured way. The explosion of the volume of digital content has exacerbated this challenge, while simultaneously supplying opportunities to automate and streamline the close process electronically. The end game remains a constant -- a way to implement a straightforward folder structure for efficient file storage and access.

While multiple organizational file categorization and storage schema exist, logic (and hence best practices) most often prevail, exemplified in a top-down, monthly folder approach. This begins with a hierarchical structure that includes business unit, year, month and account. Sub accounts are typically comprised of procedure documents (typically .doc files), supporting documents such as bank statements, invoices and contracts (often .pdfs) and reconciliation files (classically .xls workbooks).

Through standardization using this type of structure, both document storage and retrieval are accomplished in a way that contributes to a holistic view of the close, accelerates reviews through centralized access to a variety of files, and reduces the need for PBC requests and their associated tracking. The New Year is a great time to consider and begin conversion to a new folder structure, to set the stage for your next annual close, one that leverages a cohesive approach across an entire fiscal year.

Reconciliations: Standardize and Simplify

Trial balance tie outs represent the final step in a successful close, and provide the means to prep for the requisite financial reporting and audit scrutiny to follow. Here, the need to standardize remains key, with the financial team’s alignment around the reconciliation process leading the charge.

Again, cross balance sheet training will engender more consistent workbook review and reduce errors in tying reconciliations back to trial balances. This will inevitably simplify audit activity and speed their completion.

Still, for many financial teams the most critical dissonance in the reconciliation process is connecting the dots between Excel workbooks and the ERP system and General Ledger. New close management software solutions have entered the equation t to either bridge the Excel/GL synchronization gap, or, to provide alternative ways to do so not reliant on Excel.

But how best to proceed?

While consideration of new technologies should always be a topic for investigation and evaluation, some realities hold true. Excel is the de facto standard for virtually every financial team in operation today. It’s robust functionality, continued enhancement and acceptance as the common language between accountants, auditors and tax professionals is unquestioned. Even while acknowledging that it’s not the be-all for cross-team collaboration and change tracking, those factors will probably not see Excel displaced as the accountant’s “go-to” any time in the near future. The caveat: carefully consider the ramifications of close management software’s underlying infrastructure, should you decide to engage in the purchase and implementation of new technology.

It’s a Wrap: The Year-End Close is Under Your Control

Year-end closes can evolve from chaos to order across the breadth of the financial team’s tasks, close processes and the organization’s broader fiscal responsibilities. By considering and implementing structure and standardization, and taking into account the nuances of the four pillars of 1. your people, 2. your processes, 3. your documents, and, 4. your reconciliation methodology, you can take the leap from an outdated close scenario to an innovative one.


Michael Whitmire, CPA, is co-founder and chief executive officer at Los Angeles-based FloQast, a developer of close management software. Created by and for accountants, FloQast helps organizations close faster and more accurately. FloQast can be reached at