Year-End Close Checklist for Accounts Payable
Year-end close is month-end close with higher stakes. In addition to standard closing tasks, you’re preparing for audits, ensuring tax compliance, and finalizing the books for the entire fiscal year.
Year-End Close Timeline
4-6 Weeks Before Year-End
- [ ] Review prior year audit adjustments
- [ ] Identify recurring year-end issues to address early
- [ ] Communicate deadlines to departments and vendors
- [ ] Clean up vendor master file
- [ ] Verify 1099 information is current
- [ ] Review open POs for year-end status
2-4 Weeks Before Year-End
- [ ] Push for approval on pending invoices
- [ ] Begin vendor confirmation process
- [ ] Identify significant accruals needed
- [ ] Review prepaid expense schedules
- [ ] Confirm cutoff procedures with team
- [ ] Coordinate with other departments on accruals
Year-End Week
- [ ] Intensive invoice processing
- [ ] Clear all possible exceptions
- [ ] Final approvals push
- [ ] Initial accrual calculations
- [ ] Cutoff documentation
Post Year-End (Days 1-10)
- [ ] Complete invoice cutoff
- [ ] Finalize accruals
- [ ] Complete reconciliations
- [ ] Generate year-end reports
- [ ] Prepare audit support
Complete Year-End Checklist
Invoice Processing
Before Cutoff: - [ ] Process all invoices dated through year-end - [ ] Clear invoice backlog as much as possible - [ ] Resolve exceptions that can be resolved - [ ] Document exceptions carrying forward - [ ] Escalate pending approvals aggressively
Cutoff: - [ ] Document cutoff time and date - [ ] Separate invoices: current year vs. next year - [ ] Log late-arriving invoices with received date - [ ] Note invoices dated current year but received after close
Accruals
Identify Accruals Needed: - [ ] Goods received, invoice not received (GRNI) - [ ] Services rendered, not yet billed - [ ] Utilities (December usage) - [ ] Professional fees in progress - [ ] Commissions and bonuses - [ ] Interest expense - [ ] Property taxes - [ ] Recurring services (IT, security, etc.)
Calculate and Record: - [ ] Gather supporting data for estimates - [ ] Calculate accrual amounts - [ ] Document accrual basis - [ ] Record accrual journal entries - [ ] Retain support for auditors
Accrual Checklist:
| Category | Estimated Amount | Support | Recorded |
|---|---|---|---|
| Utilities | $_____ | Prior bills | ☐ |
| Legal fees | $_____ | Budget/WIP | ☐ |
| Consulting | $_____ | Contract | ☐ |
| IT services | $_____ | Prior months | ☐ |
| Other: _____ | $_____ | _____ | ☐ |
| Total | $_____ |
Vendor and Payment Reconciliation
Vendor Statements: - [ ] Request statements from top 20 vendors - [ ] Reconcile statements to your records - [ ] Investigate and resolve discrepancies - [ ] Document reconciliation results
Payment Review: - [ ] Review outstanding checks over 90 days - [ ] Follow up on stale checks - [ ] Consider escheatment requirements - [ ] Document disposition of old items
Bank Reconciliation: - [ ] Complete year-end bank reconciliation - [ ] Clear reconciling items possible - [ ] Document outstanding items - [ ] Ensure bank rec ties to GL
Account Reconciliation
AP to GL Reconciliation: - [ ] Run AP aging as of year-end - [ ] Run AP control account from GL - [ ] Reconcile and document differences - [ ] Clear reconciling items - [ ] Obtain sign-off on reconciliation
Related Account Reconciliation: - [ ] Accrued expenses schedule - [ ] Prepaid expenses schedule - [ ] Other AP-related accounts
Tax Compliance (1099)
W-9 Verification: - [ ] Identify all 1099-reportable vendors - [ ] Verify W-9 on file for each - [ ] Request missing W-9s - [ ] Validate TIN information
1099 Data Preparation: - [ ] Run report of payments by vendor - [ ] Verify vendor classifications - [ ] Confirm reportable amounts - [ ] Check for payments that should be combined - [ ] Verify vendor addresses
1099 Checklist:
| Vendor | TIN Verified | Payments | Over Threshold | Form Needed |
|---|---|---|---|---|
| ☐ | $_____ | ☐ | ||
| ☐ | $_____ | ☐ |
Audit Preparation
Documentation: - [ ] Invoice register for the year - [ ] Payment register for the year - [ ] Check register with cleared status - [ ] All journal entries with support - [ ] Accrual schedules with calculations - [ ] Reconciliations (AP to GL, bank, vendor)
Audit Support Schedules: - [ ] AP aging summary and detail - [ ] Top vendor analysis - [ ] Significant/unusual transaction listing - [ ] Vendor master changes log - [ ] New vendor listing - [ ] Accrual summary with support
Confirmations: - [ ] Prepare list for auditor confirmation selection - [ ] Have vendor contact information ready - [ ] Prepare internal confirmation support
Clean-Up Tasks
Vendor Master: - [ ] Deactivate inactive vendors (no activity in 2 years) - [ ] Merge duplicate vendor records - [ ] Update vendor information as needed - [ ] Review vendors with PO Box only addresses
Open Items: - [ ] Close old POs no longer needed - [ ] Clear ancient receiving documents - [ ] Resolve aged credits and debits - [ ] Clean up suspense accounts
System: - [ ] Archive or close prior period - [ ] Set up new year periods - [ ] Update approval thresholds if needed - [ ] Review user access for appropriateness
Year-End vs. Month-End Differences
| Task | Month-End | Year-End |
|---|---|---|
| Invoice cutoff | Important | Critical + documented |
| Accruals | Estimate OK | More precision needed |
| Reconciliations | Required | Required + auditor-ready |
| Vendor confirmations | Optional | Often required |
| 1099 work | N/A | Required |
| Audit preparation | N/A | Required |
| Documentation | Normal | Extensive |
Common Year-End Issues
Late-Arriving Invoices
Problem: Significant invoices arrive after close
Solution: - Set aggressive cutoff communication - Accrue for known services/receipts - Document late arrivals - Consider adjusting journal entry if material
Missing W-9s
Problem: Vendors won’t respond to W-9 requests
Solution: - Start requesting early (October) - Hold payments if necessary - Use backup withholding if required - Document good faith efforts
Aged Items
Problem: Items outstanding from early in year
Solution: - Research and resolve or write off - Document investigation - Get approval for write-offs - Avoid surprises for auditors
Accrual Accuracy
Problem: Accruals significantly differ from actuals
Solution: - Use best available data - Document methodology - True-up when actuals known - Track accuracy for improvement
Reports to Generate
For Internal Use
- [ ] AP Aging (summary and detail)
- [ ] AP by expense category
- [ ] Vendor spend analysis (top 25)
- [ ] Cash requirements forecast
- [ ] Accrual summary
- [ ] Open PO report
For Auditors
- [ ] AP trial balance as of year-end
- [ ] AP aging detail
- [ ] Payment listing by vendor
- [ ] Check register
- [ ] Journal entry listing
- [ ] Reconciliation workpapers
- [ ] Accrual support schedules
For Tax/Compliance
- [ ] 1099 reportable payments by vendor
- [ ] Vendor W-9 status report
- [ ] State-specific reporting (as required)
Key Dates and Deadlines
For Calendar Year-End
| Date | Activity |
|---|---|
| Dec 15 | W-9 follow-up deadline |
| Dec 31 | Fiscal year-end |
| Jan 5 | Initial AP close complete |
| Jan 15 | Reconciliations complete |
| Jan 31 | 1099s mailed to vendors |
| Feb 28 | 1099s filed with IRS (paper) |
| Mar 31 | 1099s filed with IRS (electronic) |
Close Calendar Template
| Day | Activity |
|---|---|
| Day -5 | Final invoice push, accrual prep |
| Day -2 | Clear exceptions, approval escalation |
| Day 0 | Year-end cutoff |
| Day +1 | Cutoff documentation, initial close |
| Day +3 | Accruals finalized |
| Day +5 | Reconciliations complete |
| Day +7 | Reports generated |
| Day +10 | Audit support ready |
Key Takeaways
- Start year-end planning in November (for calendar year)
- Communicate cutoffs early and often
- Document everything more thoroughly than month-end
- Address 1099 compliance proactively
- Prepare for auditors from the start
- Clean up vendor master and aged items
- Accruals need better support than month-end estimates
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