What Your Year-End Close Says About Your Finance Function

Year-end close does more than finalize the prior year’s financial results. It provides an important assessment of how well the accounting function is operating and where improvements should be prioritized in the year ahead.

Year-end puts more pressure on accounting departments than a typical month-end close. In addition to normal reporting responsibilities, teams are managing year-end reconciliations and accruals, audit and tax preparation, 1099 reporting, budgeting and other management or board reporting requirements.

A difficult year-end close process should therefore be treated as information. Understanding what caused the difficulty can help management build a more efficient, reliable accounting function in the coming year.

What Is the Close Telling You?

Several common year-end issues can indicate broader problems within the accounting function:

Evaluate the Process, Not Just the Deadline

A fast close isn’t necessarily a good close. The objective should be a timely, repeatable and reliable process.

Following year-end, finance leaders should evaluate several questions:

A few gaps may point to specific process improvements. Multiple gaps may indicate a broader issue with the company’s staffing model, systems or accounting infrastructure.

Turn the Close Into an Improvement Plan

January should not simply begin another twelve-month cycle using the same processes. Companies should use the information obtained during the close to identify weaknesses and develop a specific improvement plan. It is critical to understand what went wrong and why. From there, a company can prioritize its most important concerns and determine how to improve.

Management should also determine whether the existing accounting team has the capacity and expertise to make the necessary improvements. In some organizations, the answer may be additional internal resources. In others, outsourced or co-sourced accounting support can provide additional capacity, controllership expertise, technical accounting knowledge or assistance improving processes and technology.

Use This Year’s Close to Measure Next Year’s Progress

The final step is establishing what a better close should look like.

Rather than targeting an undefined “easier year-end,” companies can set measurable goals.

Examples Include:

Implementing these changes will not only improve the month-end process but also allow the accounting function to grow and scale with changing business needs. They also produce more useful financial results to support decision-making.

A difficult year-end close isn’t necessarily evidence of failure. It is an opportunity to identify where the finance function is under strain and determine what needs to change before those weaknesses become larger problems.

The most important result of year-end, therefore, isn’t simply closed books. It is a clearer understanding of what the accounting function needs to accomplish in the year ahead.

How Withum Can Help

Withum’s Outsourced Accounting Systems and Services (OASyS) Team helps organizations turn year-end lessons into a stronger, more scalable close. From monthly reconciliations and process documentation to controllership support and accounting technology, our team provides the capacity and expertise to strengthen your finance function.