Year-End Closing Support CFO Guide to Smooth Close

When a financial year reaches its near end, it’s the time for the CFO and controller to do what is often referred to as the year-end closing. However, given its extensive and enduring process, seeking year-end closing support CFO and controller is absolutely necessary.

But what exactly is year-end closing? For a simple explanation, it is a process for finalizing the financial records from the company’s past financial year. It is mainly done by the company’s controller, since they do all the accounting tasks for the company.

Still, CFOs have a role in the strategic financial close process, which is to ensure year-end close runs smoothly and yields accurate reports. This CFO & controller guide to efficient year-end close will explain how both roles can successfully collaborate for the task.

Pre-Year-End Planning: A CFO Role in Leading an Efficient Close

A CFO must lead a strategic financial close process, whether it is done monthly or yearly (as in fiscal year). To ensure the controller does the year-end close process efficiently, here are several things they can do beforehand:

Evaluate Last Year’s Process for Bottlenecks and Gaps

The first and most logical thing to do is to review the company’s year-end closing from the previous fiscal year. A CFO does this to improve the current year-end closing process, ensuring better accuracy and minimizing errors.

But how exactly can they do that? Generally, evaluating the year-end closing process from the last financial year can be done from:

• Finding bottlenecks from the year-end closing, like if there’s a delay during inventory tracking and complex accruals and estimates manual checking.
• Identifying gaps from the year-end closing, like if there was a lack of communication when collecting financial data or some financial information seemed to be missing.

Define a Close Calendar and Assign Accountability

Being a CFO is all about strategic planning, which means they also have to plan when the year-end close starts and who does it. To do it, first, a CFO has to assign a schedule for the whole close calendar, like when to finalize accruals, review journal entries, etc.

Then, a CFO can determine which person from the company’s financial controller will perform the task. By creating a concise schedule, the year-end closing process will be more efficient and smooth, since tracking all the task progress becomes easier.

Align Early with External Auditors on Scope and Timelines

The financial statements made from year-end closing have to be audited externally, so a CFO has to make sure they are ready to be audited. Now the question is, how can they plan for an audit readiness year-end closing?

• First, talk to the external auditors about the reason for this auditing procedure. Make sure the objective is clear so the CFO can focus on the year-end closing to meet their objectives.
• Determine the scope of the main audited areas. Be straightforward about this so everyone will focus on the important areas.
• Lastly, ensure the timeline when the audit will be performed is fixed. The company’s controller needs to know when the statements have to be ready.

Secure Sufficient Resources and Communicate Expectations Internally

To make sure the year-end closing process is done smoothly, the CFO needs to check on whether all the resources for doing so are enough. Any bottlenecks and gaps from the last time they did a year-end closing should be avoided.

Make sure all personnel involved with the year-end closing process are informed of expectations internally as well. With the resources, tools, and everyone being ready, the lengthy but smooth year-end closing can finally begin.

Controller’s Checklist: Core Financial Areas to Prioritize

Now that the planning is done, it is up to the company’s controller to run the year-end closing process. To keep the process running smoothly and efficiently, use this checklist as year-end closing support CFO and controller:

• Finalizing complex accruals and estimates. Carefully review expenses and revenues that had not been paid yet and account for potential future liabilities.
• Ensuring accurate revenue and expense cut-off. Make sure to record all the transactions that are performed during the right accounting period.
• Full reconciliation of balance sheet accounts. Match the financial data from the balance sheet with the general ledger that the company has.
• Posting and reviewing material journal entries. If there are mismatches, correct and update the journal entries before posting them to the general ledger.
• Consolidating financials (for multi-entity structures). Combine financial information from all entities to create consolidated financial reports, avoiding the possibility of double-counting errors.
• Preparing financial drafts and footnote disclosures. Be explicit about any changes that are made from the company’s year-end closing financial statements.
• Completing tax provisions and calculations. Accurately calculate the tax that the company needs to pay to the federal taxes this fiscal year.

Leveraging Technology to Support Year-End Close for CFOs

Knowing its lengthy process, CFOs can resort to cutting-edge technology as a year-end closing support CFO. For example, potential errors during manual data entry can be mitigated with financial software with automation capabilities.

Plus, these programs can also help ease internal communications between teams during year-end close planning. With this, the company’s year-end closing can be done faster with fewer mistakes.

Tips on How to Collaborate Effectively with External Auditors

We’ve talked about communicating with external auditors earlier for planning an audit readiness year-end closing earlier. As additional tips for this year-end closing support CFO, here are some tips for effective collaboration:

• Deliver PBCs (prepared by client) on time and in full. Request the PBC list from auditors in advance and share it with the financial controller team to meet the PBC list on time.
• Address complex accounting issues as early as possible. Doing this can give more time to organize and finalize all the documents that are required to meet the PBC list. If there is a document that might be too consuming to prepare, ask the auditors why they need it. 
• Foster transparent and cooperative audit relationships. Establish open communication and build trust with external auditors by being cooperative. Don’t forget to have clear expectations about the outcome from the auditing process.

Conclusion

Year-end closing is a hefty and daunting collaboration between two financial roles in the company. But with strategic planning and the right technology, this long, exhausting process can be overcome together.

It even gets easier with the help of accounting and bookkeeping outsourcing services like Global Virtuoso. With seasonal & year-end support, we can provide great year-end closing support CFO and controller. Contact us for an efficient and streamlined year-end closing process!