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AP Checklist: What to Think About For the Year-End-Closing Period

Use this comprehensive AP checklist to determine what to think about for the year-end closing period, and how to ease the pain of this often painful process.

The inevitable year-end closing period is a time for reconciliation and financial reporting. While this is often a dreaded time of the year, it is also a golden opportunity for the AP team to prove its worth to the C-suite and the organization. A savvy financial team uses AP automation to verify the details of all accounts payable activity throughout the year, and in particular, ensure any costs incurred within the fiscal year are accounted for in the financial reports, even if invoices are still outstanding or awaiting internal approvals. Unfortunately, the year-end closing period is a stressful time for everyone in finance. Surprises in cost or cash flow reporting are more than unwelcome. This article provides an AP checklist summarizing what to think about during this busy and crucial season, as well as ways to ease the pain of the process and tips for what AP can do.

Start With Accounts Payable Reconciliation

The project begins with accounts payable reconciliation. The outstanding AP should match the payable account balance shown in the general ledger to ensure the amount of the AP reported is accurate. Here are the top tasks to focus on during this initial phase of closing out the books at the end of the year.

  • Compare the ending AP balance in the general ledger for the preceding period to the aged AP detail report at the end of the same period. If they don’t match, earlier periods must be reconciled.
  • Review AP journal entries from the current reporting period for timeliness and accuracy, and determine the cause of any discrepancies.

AP automation puts crucial financial data and updates instantly at the fingertips of the AP team and the C-suite. Everyone accesses updates in real-time to find discrepancies sooner and rectify them. Instead of waiting to handle a large volume of issues at the end of the year, the work is completed throughout the year. As a result, the AP staff saves time during a hectic season when everyone would prefer to get home on time to celebrate the holiday. The smart implementation of AP automation tools can even help everyone get home early for some extra holiday cheer!

Revenues, Gains, Expenses, and Losses

Once AP is reconciled, it is time to sum up the revenues, gains, expenses, and losses. The total gains and revenues are credited to the income statement summary. The use of AP automation, which reduces the risk of errors, streamlines this process and improves data accuracy. Instead of relying solely on human effort and attention, AP automation does the hard work for the AP team. And knowing the net income helps the C-suite make critical financial decisions for the year ahead. With the use of automated solutions, the AP team can get this data to the C-suite sooner, so that they can create a forecast for the upcoming year - and get home for the holidays earlier, too.

  • Set deadlines for delivering net income data to the CFO so that forecasting can be completed on time and accurately.
  • Summarize the current unpaid invoice amounts, total outstanding vendor liabilities and accruals for the period to support reporting of revenues, gains, expenses with enough time to reconcile them and provide an actionable summary to management.

Take Corrective Action in the New Year

AP automation puts updated data at the fingertips of the AP department, accounting team, and C-suite, so everyone has access to the latest information. Making necessary corrections helps the company save money in the new year. Automation processes data swiftly so the AP department has more time to analyze where changes should be made, helping them to become an integral part of the management process. Automation also allows organizations to overcome common obstacles such as:

  • complex tax regulations and accounting standards which change frequently and must be followed to the letter;
  • the difficulty often associated with getting pertinent information from outside the AP department;
  • compliance with internal regulations and policies for a streamlined approach everyone can interpret quickly;
  • the essential verification of the security of AP data and preventing fraudulent activity that could lead to significant losses and liability; and
  • trying to work together without the convenience of a collaborative software platform to accommodate a finance team with varying year-end schedules.

Thanks to AP automation, the days of compromising accuracy for speed to get the job done by the end of the year are over. Many finance and accounting professionals experience a negative personal impact from the closing process. Automation tools help the company deliver on demands for accuracy, speed, the C-suite’s needs, and the employees’ job satisfaction without compromising.

  • Schedule a seminar session with the AP team to ensure that all members are up to speed on new tax and accounting regulations in the new year.
  • Make sure that on-boarding and reference materials for AP regulations and policies are up to date for the year ahead.

Find the Right Balance Before the Year Ends

The goal of any organization is to find the right balance before the year comes to a close through careful analyzation of the facts. First, review balance sheet basics, such as cash on hand, accounts receivable, and inventory, to access the total current assets as well as long-term assets such as capital, property and equipment, and investments. Then define the current and long-term liabilities, which are debts that are due in more than one year.

Keep in mind AP includes all expenses incurred by the company that is purchased from regular creditors on an open account and are due and payable. Track the accrued liabilities, which are expenses incurred by companies that are necessary for operation but not yet paid when the books are closed. These expenses commonly include overhead and salaries as well as taxes. Tally the total current liabilities including the sum of AP, accrued liabilities, and taxes. Then review long-term liabilities such as bonds, mortgage payable, and notes payable.

Through the savvy use of AP automation, the AP team can help the C-suite calculate the owner’s equity, look for money-saving opportunities such as paying vendors early, and ultimately, help management determine the capital they can safely invest in the business to keep it profitable and progressive in the upcoming year.

  • Calculate the cost savings from existing supplier agreements for early payment discounts as well as the negative impact from suppliers where money was lost on late payment and interest fees.
  • Host a joint session with the procurement team to analyze data on the supplier network to determine areas for spend optimization or discounts.

How to Ease the Pain of the Year-End Closing Period

AP automation alleviates the stress and endless hours typically associated with the year-end closing period. Remember some wise steps to take to streamline AP procedures further, improve accuracy, and save more time:

  • Develop and document standard procedures, including checklists, for accuracy and speed.
  • Continually improve accounting and AP processes, such as gathering data from vendors, entering it into the system, and analyzing it before the end of the period. An example of a fundamental improvement to implement is using the rid accounting code in the invoice process from the vendor. AP automation simplifies such routine tasks.
  • Cross-train everyone in AP about the critical steps in case a key employee is out of the office or leaves the organization, so operations continue to move forward regardless of staff schedules and changes.
  • Replace time-consuming manual processes, such as spreadsheets, with AP automation to ensure an efficient and accurate close process. Be well-trained in the current system and find ways to eliminate manual data entry for a truly touchless and time-saving method.

Using AP automation to streamline the year-end closing period means clear disclosure of essential data to help the C-suite develop a fiscal plan for the new year. The AP team has become a crucial part of assisting organizations to boost equity and available capital by improving accuracy and finding ways to save money based on the latest data. Plus, the AP team has the benefits of job satisfaction by moving out of back-office functions to become strategic consulting partners with the C-suite. And with this AP checklist, everyone is sure to be pleased about having more time to enjoy the end of the year reverie rather than working long hours to close the books.

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