The accounts payable year end process is a crucial component of closing out your year. This portion of the year end work focuses on money you have paid and owed to vendors, suppliers, contractors, etc. (in short, money spent). This affects everything from your tax burden for the current year, your reporting and records (including tax forms for vendors), and how you will budget for the coming year, so it’s important to be thorough and detailed when navigating the accounts payable year end process.
Let’s walk through how to ensure this goes well for you.
Getting Stakeholders Involved
While the team responsible for paying your invoices and handling procurement will be central to this process, other departments and individuals may need to be brought into the process to ensure a smooth closing out of the year.
This process typically includes:
- Accounts Payable Team
- Accounting Department
- Finance Department
- Tax Team (or Your CPA)
- Vendors
- Operations and Procurement
Your management team will also likely be involved on some level, as they’ll want to review year-end reports and accounts payable balances, particularly for budgeting and forecasting for the coming year.
Outlining Jobs to Be Done
At the core of this process are a few key tasks. There will likely be additional needs on the strategic and planning level, but to get you started, you’ll want to make sure you are…
- Reviewing Outstanding Invoices
- Recording Accruals
- Reconciling Your Accounts Payable Ledger
- Scheduling Payments (especially those that must be made before year end)
- Adjusting Accounting Entries
- Logging Deductible Expenses for Tax Planning
- Generating Year-End Financial Reports
- Schedule a Call with Your CPA
Additionally, you may want to consider the below strategic tasks:
- Year-End Planning and Reporting
- Documentation for Tax Purposes
- Cost Optimization (Year-End Discounts, Incentives, Pre-Payment)
- Vendor Reviews and Making Any Changes
- Budgeting, Forecasting, and Planning
- Risk Assessments
- Vendor Gifts and Appreciation
- Evaluating Accounts Payable Department Processes
- Ask Your CPA for Their Feedback On Your Accounts Payable
Not only are there specific items you must take care of, like making sure all invoices are dated for the correct year, you must also consider how the accounts payable department and vendor management is functioning, as this is a great time of year to reassess and make any changes.
Vendor Relationships and Communication
A critical component of navigating the accounts payable year end process involves your vendors—suppliers, contractors, manufacturers, service providers, etc.—and can cover everything from contract renewal to renegotiating pricing changes and general relationship management.
Since the year-end process will identify any discrepancies or issues, this will be the time to conduct a thorough review and engage with your vendor to resolve any errors and issues. It’s also a common time of year to renegotiate contracts, manage changes in price and/or service and product need, and also handle any end of the year discussions about moving forward.
This can include any number of conversations and negotiations, including:
- Negotiating Outstanding Balances
- Developing Payment Plans and Timelines
- Providing Tax Documents
- Contract Renewals and Adjustments
- Pricing Changes and Contract Negotiations
- Pre-Payment
- Order and Inventory Need Adjustments
- Schedule Changes
- Communication and Relationship Management
Closing out this portion of your accounting for the year should be foundational to planning how you will approach vendor relationships, inventory, invoicing, and every element of this process in the coming year. It will also be greatly be impacted by overall business goals, including budgets, forecasts, and any other changes to the business, so be prepared to adjust.
If You Are Working With a CPA
If you have a CPA who handles your accounts payable, this process will be much more straightforward for you. Essentially, all that is required is asking your CPA for necessary reports, and for their feedback on what could change for the coming year.
Additionally, if you manage accounts payable internally and have concerns about this process or reports, remember you can always hire a CPA consultant for help on a specific project or for a brief period of time. It never hurts to get a professional opinion from someone who manages these sorts of details all the time.
