5 Ways to Speed Up the Year-End Close: Metric of the Month

The fastest finance teams perform annual close activities throughout the year to complete the task in 10 days or less.
Perry D. WigginsFebruary 8, 2023
5 Ways to Speed Up the Year-End Close: Metric of the Month
Photo: Zmaj88

The annual close comes during one of the heaviest workloads of the year for accountants. Month-end, quarter-end, and year-end closing processes converge in a perfect storm that takes time and energy away from operations-supporting daily activities.

However, the best accounting teams don’t wait until December 31 to begin the annual close — they actually perform closing activities throughout the year. Front-loading the work in this way makes for a more efficient year-end closing process that helps accounting teams get back to business as usual much more quickly.  

APQC finds that the fastest organizations (those in the 25th percentile) perform the annual close in 10 days or less. That’s nearly twice as fast as organizations at the median and more than three times faster than organizations at the 75th percentile.

For the most accurate assessment of finance’s performance on this measure, APQC recommends benchmarking within your industry and relative to peers of a similar size and complexity. For example, organizations with less than $100 million in annual revenue have a median cycle time of 10 days, while organizations with revenue between $1 billion and $5 billion have a median cycle time of 23 days. 

Perry D. Wiggins

A company’s stakeholders and compliance deadlines are also going to play a big role in determining the optimal cycle time for the annual close. A 15-day cycle, for example, may not leave enough time for some companies to conduct sufficient subsequent reviews of transactions after the cutoff period. Keep factors like these in mind as you determine the ideal cycle time for your organization.

Perform Pre-Closing Activities

The year-end closing process can be a very time-consuming and complicated set of activities for any accounting team, but it doesn’t need to be. This process can be made faster and easier by performing pre-close activities throughout the year in the run-up to the annual close. Below are five pre-closing activities that help to ensure a faster and smoother year-end close. 

1. Craft a Gameplan

One of the first and most important things an accounting team should do is develop a game plan for the annual close. Leaders should determine and communicate when certain close activities are going to be performed and by whom. The communication and delegation of activities must be clear, especially for leaders within large organizations that have multiple business units or are globally distributed.

2. Get the Business Involved

Involve all areas of the business in the yearly close. It is important for financial leaders to work with colleagues in the warehouse, payroll, human resources, and other functional departments to ensure these parties are aware of how their work affects the goals of the yearly close.

3. Use a Checklist

Planning should include a checklist with all of the pre-closing, closing, and post-closing activities that need to be completed. The checklist should be available to all members of the accounting team and anyone else who might be involved in the close process. While a checklist might feel elementary and simplistic, it can ensure that the sequential steps are completed smoothly and on time.

4. Perform Monthly Reconciliations

Reconciliations of complex accounts can require a great deal of time to work through. Typically, reconciliations on accounts related to liability and revenue involve tracing transaction entries to source documents. That adds another layer of time and complexity to the process. When daily system reconciliations are not possible, monthly reconciliations help reduce the time required at year-end to ensure the accounts are accurate, allowing the team to move on to other closing tasks more quickly.

5. Scan for Changes and Stay Up to Date

Look for anything that could cause an unexpected deviation in performance or require a lot of additional work. For example, in recent years, the Financial Accounting Standards Board updated its standards for revenue recognition, which would certainly make the process more complicated for teams that were caught unprepared for the change. Do a quick check against any changes in accounting or tax regulations well before the year’s end — late December or early January is a terrible time to realize you’ve just been saddled with a lot of extra work and compliance-related activities.

As you put your checklist and schedule together, look at how long it took last year and think about how you might shave two or three days off this year and each year moving forward. Identifying and performing as many pre-close activities as possible will help the process move faster and give accounting teams the gift of more value-added time while mitigating stressful work spikes.

Perry D. Wiggins, CPA, is CFO, secretary, and treasurer for APQC, a nonprofit benchmarking and best practices research organization based in Houston, Texas.