Your Guide to Avoiding a Year-End Close Meltdown

As the year draws to an end, accounting and finance executives are preparing for the dreaded financial year-end close. For many, this is a stressful time. But having a fast and accurate year-end close process can bring many benefits to organizations.

A fast and accurate year-end close changes that experience. It gives you clarity, confidence, and the ability to move into the new year with momentum. Read on to learn how you can streamline your year-end close, reduce risk, and free your team to focus on what matters next.

Why Year-End Close Feels So Hard

Year-end close is not just a bigger version of month-end. It pulls together everything that happened throughout the year, often under tighter deadlines and higher scrutiny. You are finalizing ledgers, collecting and validating data, making adjustments, and producing reports that leadership and auditors rely on.

At the same time, you are expected to look forward. Budgets are being finalized, forecasts are being updated, and macro changes demand attention. Without preparation, these competing priorities can overwhelm even experienced teams.

Common Challenges to the Year-End Close that Slow You Down

Many year-end close challenges stem from the same underlying issues that appear earlier in the year and intensify in December. When these challenges stack up, the close becomes reactive instead of controlled. You may recognize a few of these:

• Financial surprises during year-end review
• Late-arriving or incorrect data
• Breakdowns in the process that could have appeared during the monthly or quarterly close, but had not been found until year-end
• Communication gaps
• Staff burnout
• Technology overload – although not a common issue, it is one that should have a prepared backup plan

Warning Signs that You Need to Improve Year-End Close Processes

Many of the warning signs have already been mentioned, but many of these have root causes to consider. The warning signs include:

• Delayed release of financials
• Internal or external auditor findings
• Finance staff working long hours
• Significant manual activities – such as journal adjustments
• Lack of adherence to the financial close calendar
• Lack of a standard Chart of Accounts across divisions
• More time spent talking about the past than the future
• Talking about the prior month close to the end of the current month

Signs Your Close Process Needs Improvement

The financial close is a process, not an event. An efficient financial close process begins by knowing where you are and where you want to go. The foundation of an efficient close process is built with the right people, the right processes, and the right technology. An excellent close process is efficient and accurate – the path requires working together and improving continuously.

The Hackett Group benchmark research shows that world-class companies will consolidate and close the month-end books within 3 business days and report within 2 business days. Bottom performers close the books in 10 business days or more. Efficient monthly and quarterly close processes can result in an improved year-end close.

Many companies can be found still close the books in the same way as they did 10 years ago. Organizations are often challenged in today’s world to reassess and rationalize their close process.

An efficient close process leaves little room for guesswork. If you are seeing any of the following, it may be time to reassess how you close:

• Delayed release of financial statements
• Internal or external audit findings
• Ongoing overtime for finance staff
• Significant manual effort throughout the close
• Missed milestones on the close calendar
• Inconsistent charts of accounts across entities
• More time spent reviewing the past than planning ahead

Year-End Close Tools and Technologies to Streamline the Process

There have been a number of improvements in financial software technology over the last 10 years that can help streamline the financial close and reporting process.

• Enterprise performance management (EPM) platforms that integrate directly with transactional systems and support complex consolidations
• Financial close process workflow, account reconciliations, and disclosure management software
• Master Data Management (MDM) solutions
• Robotic Process Automation (RPA)  tools that automate and reduce manual activities
• Cloud-based applications that can be deployed quickly and offer robust features and functions to support small, medium, and large enterprises

All of these software technologies provide the ability to automate and accelerate the financial close and reporting process. Thousands of companies are already benefiting from these tools.

Adapting to New Regulatory Requirements and Standards

An efficient financial close and reporting process also depends on the organization’s ability to accommodate and adapt quickly to new regulatory requirements and reporting guidelines. Some of the recent changes that must be considered are:

• Tightened SEC filing deadlines
• Upcoming revenue recognition and lease accounting guidelines
• New disclosure requirements
• Increased SOX controls

Flexibility in processes and technology is key to adapting quickly to new requirements.

Business Benefits of a Fast Close Process

Organizations demonstrating a world-class year-end close process realize numerous benefits over the bottom performers. One of the biggest benefits of a fast close is that the finance team spends less time gathering data and can focus more time on data analysis and future FP&A. Crafting a repeatable year-end financial close checklist that entire teams can follow creates a faster, more accurate end result. Specific benefits include the following:

• Financial information is available earlier. This helps management make prompt, informed, and effective decisions.
• Process gaps are found quickly and resolved even faster
• Early and effective external publication of financial results is viewed as a key indicator of strong financial management.
• Better alignment with finance and the business on what we did and what we are going to do about it.

A faster year-end close demonstrates how seriously the company adheres to its responsibility to report its financial position. It also shows evidence that the organization has sound financial systems and procedures in place and is a good indication of company health.