Essential Year-End Bookkeeping Checklist for Accounting and Legal Professionals

your year-end bookkeeping checklist

At the fiscal year-end, many busy professionals find themselves drowning in reconciliation and bookkeeping work (read: looking for missing receipts, reminding clients to pay, and scrambling for financial statements.)

If your financial closing tends to spike your heart rate right before the holidays, this post is for you. End-of-year bookkeeping is critical for ensuring your firm’s financial health, audit readiness, and compliance – but luckily, there are ways to do it without losing your sanity every year.

In just 6 steps, this essential year-end bookkeeping checklist is designed to help you close out the year right. It’s tailored to meet the needs of accountants, CPA bookkeeping firms, and law firms.

1. Preparing for Year-End Closing

Year-end closing is the process of evaluating all your firm’s financial transactions over the fiscal year. It takes careful preparation and a lot of math to account for all your costs, revenue, investments, and assets.

Starting early and staying organized is the key to a successful year-end closing. According to the APQC, the fastest organizations perform their close in 10 days or less, and they achieve this feat by front-loading their closing work during the year.

 That means your firm should continuously prioritize reconciliation and watch out for typos and errors in the financial records. This allows you to focus on setting goals for next year and creating detailed financial reports.

3 Steps to Begin Your Year-End Closing Right

  1. Build your year-end gameplan. As early as possible, your leadership team should document what’s needed, when the close activities will get rolling, and who will take point on each activity.
  2. Communicate all deadlines across business units. The fiscal close date – along with all the data processing and reporting deadlines – should be crystal clear to everyone. Depending on how large your firm is, leaders in many different areas may need to provide input as the data is collected and reviewed.
  3. Create a year-end bookkeeping checklist (like this one!) It doesn’t have to be a multi-level 30-step list. But at the end of your planning, you should have some type of checklist that recaps all the major pre-closing, financial closing, and post-closing activities.

Another key step to prepare for your firm’s financial closing? Using your accounting software to its fullest potential. This means setting up integrations and automation that will make your life easier in the long run. (For example, syncing your practice management system directly with your payment platform so your online payments will show up automatically.) Automation is the best way to avoid scrambling each December.

2. Reviewing Financial Statements

Once you’ve charted your course for the year-end close, it’s time to compile all your firm’s financial statements. This means reviewing every balance sheet, income statement, and cash flow statement for accuracy and completion.

Other key documents that fall under this category:

  • Vendor statements for services rendered
  • Previous tax returns for your firm
  • Bank statements
  • Credit card statements
  • Payroll reporting
  • Loan statements

One of the best ways to ensure the accuracy of financial statements is by translating all the documents into a digital format. Scan and convert any statements immediately upon receipt in the mail. Then, add the PNG or PDF files to your accounting software so that you have backups.

3. Reconciling Bank Accounts and Credit Cards

Reconciliation can be a time-consuming manual task for your team if not done throughout the year. It involves:

  • Comparing your bank and credit card statements with internal records.
  • Investigating any discrepancies for errors or omissions.
  • Adjusting the accounting records accordingly to reflect all transactions.

Why is reconciliation such a fundamental part of the year-end bookkeeping process? One word: Compliance. After thorough reconciliation, you can rest easy knowing that your firm’s stakeholders are getting an accurate financial report and the best possible picture of the firm’s fiscal situation. It also prevents fraudulent activity, safeguards your firm from potential risks, and supports audit readiness and tax preparation.

Some of the most common issues you may need to address in reconciliation:  

  • Unreported transactions
  • Duplicate transactions
  • Bad data
  • Typos
  • Fraudulent activities

4. Managing Accounts Receivable and Payable

Closing Out Your Accounts Receivable

Too many professional service firms face the same annual challenge: In the 2023 QuickFee AR and Invoicing Report, firms reported 47.6 days on average to get paid, with over 32% taking 60 days or more.

If there was ever a time to collect on those annoying past-due invoices, it’s during your year-end closing process. That part of Accounts Receivable management may seem daunting, but it’ll kick off the New Year right and infuse your firm with cash for strategic investments – like advertising spend, new technology, and talent recruitment.

During the year-end closing, we recommend sending friendly reminders to any clients who still haven’t paid. It’s also wise to offer a payment plan option so that clients have the flexibility to pay over time – without completely sacrificing your firm’s cash flow in the process. Giving clients a grace period is all well and good, but for your firm to get paid the full amount upfront (and avoid having to write some clients off as bad debt), you’ll need to point them to a financing option.

Closing Out Your Accounts Payable

Paying your firm’s debts to vendors and partners is also important (although a bit less satisfying than collecting old A/R!) As with the previous sections, you’ll need to do some reconciliation work to be positive that your costs match the vendor statements.

If there are any payables still owed at the end of the year, you will have to list them as liabilities on your final balance sheet. In the same vein, your receivables should be added as credits.

5. Tax Preparation and Compliance

Remember how we mentioned tax preparation earlier? We’re mentioning it twice in this year-end bookkeeping checklist, because it’s just that critical to dedicate enough time to your tax preparation and compliance efforts.

You’ll want to keep this general checklist for tax-related documents and records handy as you work through your tax preparation:

  • Tax Returns: Copies of filed federal, state, and local returns
  • Financial Statements: Balance sheets, income statements, cash flow statements.
  • General Ledger: Detailed record of all financial transactions.
  • Payroll Records: Employee earnings statements (W-2s or 1099s), payroll tax filings (941 forms)
  • Expense Records: Receipts and documentation for deductible expenses, business credit card statements
  • Asset Records: Records of asset purchases and disposals, depreciation schedules
  • Bank Statements: Including your reconciled bank statements for all accounts.
  • Contracts and Agreements: Any related document that impacts your tax liabilities.
  • Receipts for Deductible Expenses: Documentation for business-related expenses
  • Client Billing and Invoicing: Records of services provided; records of Accounts Receivable
  • Legal Documents: Any legal filings or documents relevant to tax positions
  • Records of Capital Transactions: Documents for any mergers, acquisitions, or sales of business assets

Professional service firms also have unique considerations. Because clients tend to take longer to pay, getting all your client billing in order – and getting a proper recognition of your revenue – is vital for full compliance with accounting standards and tax regulations. You may even have international tax considerations if your firm works with clients globally.

Lastly, there are special compliance needs for ethical law firm financial management. Perhaps most importantly, you’ll need to document how you’ve followed IOLTA program rules regarding client trust accounts. These concern the proper handling of interest earned on client accounts throughout a case.

6. Assessing and Planning for the Next Fiscal Year

Now that you’ve scanned every receipt, compiled every tax document, and reconciled every transaction, it’s time to evaluate your past performance and create reports. You should also use this time to set clear goals for next year.

We recommend carrying over your historical financial goals from previous years first, then modifying them with one of these proven goal-setting frameworks:

  • OKR: Stands for Objective and Key Results. In this system, your team will select 3-5 high-level objectives for the year. Then you set specific results and metrics to achieve within those top objectives.
  • SMART: First introduced in 1981, the SMART system requires every goal to be Specific, Measurable, Achievable, Realistic, and Time-Bound. This approach works well if you need to get more alignment on what your team should measure.
  • Backward Goals: With this model, you simply plan your fiscal end goal and then work backward. Studies have shown that “reverse” planning like this creates more motivation and gives people less anxiety about goal-setting!

In today’s evolving tech terrain, it’s also important to take evolving technology and training into account in next year’s budget. Legal and accounting software to enhance your efficiency, cybersecurity, and data management will set a strong foundation for the year ahead.

By incorporating a forward-thinking mindset into their planning process, accounting and law firms can position themselves for success in the next fiscal year and beyond.

QuickFee’s Tools for Streamlining Year-End Bookkeeping

For your firm’s continued health and growth, you should invest careful thought into your year-end financial close. And with the help of this year-end bookkeeping checklist, you’ll be well on your way to making the entire process simpler!

If you find yourself needing more support with year-end financial management, QuickFee can help. We offer easy online payment processing, a revolutionary client financing option, and time-saving practice management integrations for accounting and law firms.

Every part of the QuickFee platform is tailored to help your firm reduce manual work, track payments more effectively, and reduce aging Accounts Receivable. That way, you can rest easy at year-end, knowing your payments are covered.

For a more streamlined financial process, contact us today to schedule a quick demo!