Before Year-End Close: 8 Questions Every CFO Should Ask

Year-end close is more than an accounting function. It serves as a critical checkpoint to protect financial integrity, reinforce internal controls, and ensure compliance.

Proactive strategies help financial leaders prepare for year-end and build year-round resilience. A well-executed close supports compliance, audit readiness, and provides leaders with reliable data for strategic decisions. Research from the American Productivity and Quality Center shows top performers complete their annual close in 10 days or less, nearly twice as fast as median performers.

Consider these eight questions to approach year-end strategically.

Is our financial data accurate and accessible?

Your year-end close is only as good as the financial data behind it. Eight in 10 finance leaders say their month-end close is delayed because they must wait for data from other systems and departments, and more than half say reconciling information across multiple platforms is a major barrier to an efficient close.

As AI adoption increases, data quality becomes even more critical. Gartner predicts that 70% of finance functions will use AI by 2030, yet many companies still struggle with effective implementation.

AI can amplify fragmented processes. When systems are disconnected, teams must manually compile data, leading to slower reporting and a higher risk of errors.

Ensure data is accurate, accessible, and secure to provide leaders with reliable insights into margin durability and long-term growth.

Do we have clear AI governance?

A recent Eide Bailly client survey found that 43% of respondents are using individual AI tools without a formal strategy or governance. Rapid adoption without oversight increases risk.

AI-driven reconciliations and adjustments require clear, documented audit trails for compliance teams. Before scaling, define output validation, risk management, and policies for data privacy, algorithm oversight, and vendor evaluation.

What caused our largest variances?

Pinpoint the exact operational drivers behind the biggest deviations between actual year-end numbers and the original forecast. Were variances driven by pricing, labor, inventory, customer demand, supply chain disruptions, or operational inefficiencies? Understanding the root causes behind significant deviations can improve forecasting accuracy and help leaders make more informed decisions in the year ahead.

Determine if any business units, products, or projects are consuming more capital than they return. Year-end is an ideal time to evaluate whether products, service lines, facilities, technology investments, or business units are generating the expected return. Understanding where capital is underperforming helps leaders redirect resources toward higher-value initiatives.

By combining historical financials with current operational data, scenario modeling, and technology-enabled analysis, businesses can build more responsive financial plans.

Have we taken the right tax credits and incentives into account?

For many organizations, key incentive decisions must be made before a project or production begins. A recent Eide Bailly client survey found that over 30% of leaders say incentive timing rules and deadline tracking are critical for future success.

Rather than waiting until a project is complete or a tax deadline is near, financial leaders should ask:

• Which capital investments should be approved or accelerated before year-end?
• How do current and projected tax positions affect our ability to use or monetize available credits?
• Can credit strategies improve the timing of cash flow?
• Which budget assumptions should be updated to reflect available incentives?

What new regulations, tax legislation, or economic shifts may affect us?

IBM research finds that 90% of executives believe they will lose their competitive edge if they cannot operate in real time. This is especially relevant during economic and geopolitical uncertainty.

CFOs are responsible for ensuring all updated compliance mandates, reporting standards, and tax legislation are fully addressed.

Where are we most exposed to risk?

Financial data is a top target for cybercriminals, and year-end stress makes mistakes more likely.

Ask yourself:

• Are we sharing close data securely?
• Who has access to our accounting systems? Is it logged?
• Are multi-factor authentication and access controls enforced?
• Are our backups current, accessible, and tested?
• Are employees trained on phishing, ransomware, or other threats?
• Have we reviewed internal controls for potential gaps or fraud risks?

How do we shorten next year's close timeline?

Year-end involves managing significant volumes of information. Many teams face challenges closing out the year efficiently, with most companies taking over 30 days to complete the process.

Common causes of year-end challenges include:

• Inaccurate or incomplete data makes reporting unreliable and creates risk in financial decision-making.
• Inefficient processes, often built from outdated systems or manual spreadsheets, create bottlenecks and slow progress.
• Siloed systems limit visibility, hinder collaboration, and increase the risk of compliance issues and reporting discrepancies.

It is essential to focus on the following areas:

Financial Cleanups

• Chart of Accounts: Consolidate and rationalize accounts for clarity and consistency
• Receivables & Payables: Review aging reports for accuracy and potential write-offs
• Fixed Assets: Capitalize purchases per policy and reconcile loans
• Revenues & Expenses: Classify properly and match to 1099/W-2 forms
• Equity & Retained Earnings: Verify balances and close out prior year distributions

Operational Cleanups

• User Roles: Remove outdated users and enforce least-privilege access
• System Permissions: Review access by function and role
• Workflow Mapping: Identify and reduce bottlenecks or duplication
• Backup Processes: Verify off-site backups and data security measures

Here are a few checklists to help ensure you keep track of the items that matter:

Balance Sheet Checklist +

Make sure your assets match your liabilities and equity on your balance sheet.

Perform reconciliations for all cash, credit card, and loan accounts through December/year-end. Are there any checks or deposits that have not cleared? Are these items duplicates? Do you need to void and resend a check? Do you need to review these items as possible unclaimed property? Where did the money for the uncleared deposit go if it didn’t hit the bank account?

If you are on a cash basis, make sure any checks written in December that have not cleared are entered.

If you are on an accrual basis, make sure all customer invoices and accounts payable are entered. This ensures you’ve captured all income and expense items related to the current year.

Gather copies of all fixed asset purchases and related loan documents, if any purchases were financed. Be sure to capitalize any fixed assets in accordance with your capitalization policy.

Look at your accounts receivable aging. Will everything be collected? Do you have any bad debt items that need to be written off or sent to a collection agency?

Adjust inventory, prepaids, security deposits, etc. as needed.

Look at your accounts payable aging. Is there anything that you will not be paying or that was entered twice?

Look at your liabilities. Do your loan balances agree to your balance sheet? Have you appropriately recorded interest and fees as expenses?

Make sure the December sales tax and payroll liability balances match your January payments.

Were distributions to owner(s) or contributions from owner(s) recorded in the correct equity accounts?

Does the retained earnings balance agree to the last year ending balance? Do prior year distributions need to be closed to retained earnings?

Profit and Loss Checklist +

Do a quick check through your revenue. Are there any negative amounts in revenue accounts that should be entered as expenses or that should go to a discount/refund, a cost of goods sold account?

Review your revenue accounts for unusual items. It is a good idea to record unusual or infrequent income in a different account than your standard revenue accounts.

Gather any 1099s received. Compare the sum of form amounts to your revenue accounts. Do you show more or less revenue than the form totals? Note 1099 amounts might include sales tax or tips. Gross up revenue as needed to tie to 1099s.

Compare your profit and loss statement to other time periods to make sure it appears complete and accurate. Compare to the previous month and the previous year reporting.

Review your cost of goods sold account for the year as a percentage of revenue. Review your expense items for the year as a percentage of revenue. Do these accounts seem reasonable? Compared to other time periods, does the percentage appear similar, or at least within a range?

Review your expense accounts and determine if any 1099s should be prepared. Be sure you have W-9s for vendors that will need to receive a 1099 from you.

Prepare copies of your W-2s and W-3s and send them to your employees and the Social Security Administration in a timely manner.

Remember that any single expense purchase over $2,500 should likely be a fixed asset. The safe harbor threshold for capitalization is $2,500. For instance, if you bought three computers that totaled $2,600, they would remain an expense item if any one computer is not over $2,500. This threshold may be different depending on your capitalization policy.

Look through your miscellaneous or uncategorized income and expense accounts. Code to a proper account unless very minimal.

Separate officer health from employee health insurance. If you are an S corporation, be sure to appropriately include this amount on the W-2s for the owners as required.

Review your charitable contribution accounts. Reclass any promotion/sponsorship items to advertising. Remember, only donations to qualified organizations are deductible as a charitable expense. Also, political contributions are not deductible.

Review your meals and travel accounts. Be sure to separate any entertainment expenses into a separate account. It is a good idea to separate meals into a separate account as well.

Year-End Data Checklist +

If you use accounting software, making a backup after year-end is a good idea. A more frequent backup is recommended. Be sure to store a copy of this backup offsite.

If your accounting software has a closing process, be sure to complete that process. For example, set a closing password, so that changes cannot be made in previous periods for closed periods. Also, close income to equity accounts so you can start the next year fresh.

Year-end is a good time to prepare your documents for your document retention process. Do you scan and electronically store documents for the required length of time? Do you file your data in boxes and place those in storage? Year-end is a good time to review and update your document retention process as well as purge older data.

Can we trust our reporting to scale with growth?

Many CFOs don't worry about the year-end close itself. They worry about what the year-end close reveals about the health of the finance function. Year-end challenges often reveal broader issues with systems, controls, reporting processes, and organizational capacity. If reporting becomes increasingly difficult as the business grows, it may be time to modernize technology, redesign workflows, or strengthen internal controls before those gaps become larger risks.

Make the Close an Opportunity for Growth

As you close the books:

• Identify where processes or systems held you back
• Forecast investments needed in technology or risk management
• Prioritize gaps in roles, training, or documentation
• Plan for compliance updates and regulatory shifts

Remember, year-end close doesn’t happen in a vacuum. It works best when it’s collaborative and driven by business goals.

At Eide Bailly, we help financial leaders safeguard the integrity of their year-end close by enhancing security, strengthening compliance, and optimizing processes.

Let’s make this your most efficient and secure year-end close yet