Year End Close for General Contracting
Year End Close is the annual extension of the month-end close that ensures the entire fiscal year is accurate, complete, and ready for tax filings, lender reporting, and strategic planning. It includes tightening cutoffs, reviewing all balance sheet accounts, reconciling job cost and WIP, finalizing fixed assets and depreciation, and coordinating with external accountants. The process also produces year-end management reports and locks the prior year against casual changes. When done properly, Year End Close creates a clean financial foundation for audits, tax returns, and the upcoming year’s budget.
Plan Year-End Close Calendar and Master Checklist
Step 1: List all additional year-end activities
Start from the standard month-end checklist and add specific year-end tasks such as full balance sheet reconciliations, fixed asset review, inventory counts (if applicable), tax schedule preparation, and external CPA requests.
Step 2: Estimate time required for each activity
For each task, estimate how many days it typically takes based on prior experience. Factor in dependencies like needing final bank statements or WIP reports before certain tasks can start.
Step 3: Create a detailed year-end close calendar
Lay out tasks across a calendar covering the last month of the fiscal year and the first month of the new year. Assign target dates for starting and completing each step, working backward from tax or lender deadlines.
Step 4: Assign owners and backup contacts for each task
For every line in the checklist, name a primary responsible person and a backup. Include AP, AR, payroll, project accounting, and leadership where needed.
Step 5: Review and finalize the plan with leadership
Walk through the draft calendar with the finance leader and key managers to confirm feasibility. Adjust timing for holidays, vacations, and other constraints so the plan is realistic.
Step 6: Distribute and publish the year-end checklist
Share the final checklist and calendar with all impacted team members. Post it in a shared location and reference it regularly during year-end so people stay aligned.
Tighten Year-End AP and AR Cutoffs and Clean Up Open Items
Step 1: Communicate stricter cutoffs for December (or year-end month)
Send a reminder to project teams and vendors stating the last day for submitting invoices and billing approvals that will be included in the current fiscal year. Emphasize that late items may be pushed into the new year.
Step 2: Review AP aging for old or unusual items
Run an AP aging report and identify invoices that are very old, duplicated, disputed, or no longer valid. Work with project managers and vendors to decide whether these should be paid, adjusted, or written off.
Step 3: Resolve or write off stale AP balances
For each stale payable, either obtain approval to pay, post a credit memo, or write off the balance according to company policy. Document reasons for any write-offs in your workpapers.
Step 4: Review AR aging and unbilled items
Run an AR aging report and list customer balances that are significantly past due or disputed. Also review unbilled revenue balances and confirm that they represent real earned amounts.
Step 5: Decide on collections actions and bad debt provisions
For difficult receivables, coordinate with project management and leadership to decide on further collection efforts or writing down balances. Record any agreed bad-debt provisions via journal entries.
Step 6: Freeze year-end AP and AR dates after cutoff
On the day after your cutoff, stop back-dating AP and AR to the closing year except with specific finance approval. Use accrual entries for material items discovered after cutoff that truly belong in the prior year.
Perform Comprehensive Balance Sheet Reconciliation
Step 1: List all balance sheet accounts from the trial balance
Export a list of all balance sheet accounts (assets, liabilities, and equity) as of year-end. Mark which ones already have monthly reconciliations and which need extra work at year-end.
Step 2: Prepare or update detailed schedules for each account
For each account, create a schedule that breaks down the total into individual items (for example, by vendor, by job, by customer, or by document). Use spreadsheets or system reports to build these schedules.
Step 3: Tie schedules to external documents where possible
For accounts like bank, loans, retention, and payroll liabilities, match schedule totals to bank statements, loan statements, retention reports, or payroll filings. Note any timing differences or pending items.
Step 4: Investigate and resolve unexplained balances
Pay special attention to “miscellaneous” accounts, suspense accounts, and small balances that have built up over time. For each, determine whether it should be reclassified, written off, or supported with better documentation.
Step 5: Post correcting entries as needed
Where you find errors or misclassifications, record journal entries to move amounts to the correct accounts or clear out invalid items. Clearly explain each entry in your reconciliation workpapers.
Step 6: Sign off on reconciliations and file workpapers
Once each account is reconciled and corrections are posted, mark the reconciliation as complete and sign or initial the schedule. Save all reconciliations in the year-end close folder, organized by account.
Review and Finalize Fixed Asset and Depreciation Schedules
Step 1: Run fixed asset register and depreciation reports
From your accounting system or fixed asset software, generate a list of all assets, including cost, accumulated depreciation, and net book value as of year-end. Also run a report of current-year additions and disposals.
Step 2: Review current-year additions for completeness and coding
Compare the additions list to capital purchases recorded in the general ledger. Ensure all qualifying assets (such as major equipment and vehicles) have been capitalized instead of expensed and coded to the correct asset categories.
Step 3: Identify and record disposals or retirements
Work with operations and equipment managers to identify assets sold, scrapped, or no longer in use during the year. Confirm sale proceeds or scrap values and record disposals in the fixed asset system and general ledger.
Step 4: Verify depreciation methods and useful lives
Check that each asset uses the correct depreciation method and useful life according to company policy and applicable accounting rules. For any that appear incorrect, adjust settings and recalculate depreciation.
Step 5: Post final year-end depreciation entries
Calculate depreciation for the last period of the fiscal year and post the journal entry to record depreciation expense and accumulated depreciation. Tie the entry back to the fixed asset reports.
Step 6: Reconcile fixed asset accounts to the general ledger
Compare total asset cost and accumulated depreciation from the fixed asset register to the corresponding general ledger accounts. Resolve any differences and file the final fixed asset and depreciation schedules in the year-end workpapers.
Finalize Job Cost, WIP, and Close Completed Projects
Step 1: Identify jobs that are substantially complete or fully complete
Work with project managers to identify which projects have finished all major work, passed final inspections, and received final payment or are in the last minor punch-only phase.
Step 2: Review job cost and revenue for each near-complete job
For each such job, run detailed cost and billing reports. Confirm that all subcontractor invoices, material costs, and internal labor have been captured, and that all approved change orders have been billed.
Step 3: Determine final job margin and WIP status
Using the updated cost and billing data, calculate the final or near-final margin and check whether the job is under-billed or over-billed at year-end. Adjust WIP entries if needed to reflect realistic final results.
Step 4: Close jobs that meet company criteria
If a job has no further work, open commitments, or expected billings, close it in the project and accounting systems according to company procedures. This may involve changing status codes and restricting new cost entries.
Step 5: Clean up small residual balances
For closed jobs with small residual balances in cost or revenue accounts, decide whether to reclassify these amounts to overhead or adjust them as part of final margin. Post journal entries to clear out immaterial amounts.
Step 6: Update WIP schedule and job listing
Refresh the WIP schedule and active job lists to reflect closed projects and updated margins. File a copy of the final job cost summary for each closed job in the year-end workpapers.
Review Revenue Recognition and Year-End Adjustments
Step 1: Compare total contract revenue to WIP and job summaries
Reconcile total contract revenue and WIP amounts across WIP schedules, job cost reports, and the general ledger. Ensure that each job’s contract value, earned revenue, and billings-to-date line up across sources.
Step 2: Check for jobs with unusual profit patterns
Identify projects showing very high or very low margins or large swings in profit compared to prior months. Flag these for deeper review with project managers.
Step 3: Discuss unusual jobs with project team
Meet with the relevant project managers to confirm whether unusual profit patterns are due to real performance, scope changes, or data issues. Take notes on explanations and any corrections needed.
Step 4: Adjust revenue and cost if required by policy
Based on these discussions and company accounting rules, record any needed year-end entries to adjust revenue recognition, cost allocations, or provisions for anticipated losses.
Step 5: Recalculate WIP and revenue summaries
After posting adjustments, refresh the WIP schedule and revenue summaries. Confirm that total revenue, gross profit, and under/over-billings at year-end now look reasonable.
Step 6: Document revenue recognition decisions in workpapers
Write a brief explanation for significant adjustments or judgments made around revenue recognition. File this memo with WIP and revenue workpapers for reference by leadership and external accountants.
Prepare Year-End Vendor and Tax Reporting Schedules
Step 1: Identify vendors subject to year-end reporting
Based on local regulations and company policy, determine which vendors, subcontractors, or individuals require year-end reporting (for example, based on payment type, amount thresholds, or tax status).
Step 2: Run vendor payment summaries for the year
From the accounting system, generate reports showing total payments to each vendor for the year, broken out by type of payment if required (for example, services vs materials).
Step 3: Verify vendor tax and address information
Check that each reportable vendor has complete and up-to-date tax identification numbers and mailing addresses. Request updated forms from vendors where information is missing or appears incorrect.
Step 4: Reconcile totals to general ledger
Confirm that the total payments being prepared for reporting match the related expense and cost-of-sales accounts in the general ledger, allowing for any non-reportable components.
Step 5: Populate year-end reporting templates or forms
Enter verified payment amounts and vendor details into the year-end reporting templates or software used by your company or tax preparer. Double-check high-dollar and high-volume vendors for accuracy.
Step 6: Store supporting schedules for filings
Save vendor payment summaries, reconciliation work, and draft forms in the year-end workpaper folder. These schedules will support the final filings and any questions from vendors or tax authorities.
Coordinate with External CPA / Tax Advisor
Step 1: Obtain year-end request list from external advisor
Ask your CPA or tax advisor for their standard year-end document request list and timeline. Clarify any items that are unclear or do not apply to your business.
Step 2: Map requests to internal reports and owners
For each requested item, identify which internal report, system, or person can provide it. Assign responsibility and due dates, and add these to your year-end checklist.
Step 3: Prepare and package requested financial data
Gather trial balances, financial statements, WIP reports, fixed asset schedules, reconciliations, and other requested documents. Organize them in a logical folder structure, clearly labeled with dates and descriptions.
Step 4: Provide secure access or send files
Share the package with your external advisor through a secure portal or encrypted file transfer method. Avoid sending sensitive data through unsecured channels like general email without protection.
Step 5: Track questions and additional requests
As the advisor reviews your information, log their questions and additional data requests. Assign each item to an internal owner, track due dates, and respond in a timely, organized way.
Step 6: Review draft tax returns or reports
When the advisor provides draft tax returns or year-end reports, review them carefully for consistency with your books and key assumptions. Discuss any discrepancies or concerns and agree on final versions before filing.
Prepare Year-End Management Reports and Analysis
Step 1: Define the key questions leadership wants answered
Meet with company leaders to ask what they most want to understand from year-end results (for example, profitability by project type, performance versus budget, overhead trends). Write these questions down as guideposts.
Step 2: Design management report layouts
Create simple, clear report formats or dashboards that answer these questions. Examples include profit by job size, gross margin by client, overhead by department, and cash and debt trends over the year.
Step 3: Generate supporting data from accounting and job systems
Run the necessary detail reports and export them to spreadsheets or business intelligence tools. Clean and organize data so that it can be summarized by the categories you defined.
Step 4: Build summary tables and charts
Construct tables and charts that show year-over-year comparisons, margins by segment, and contributions of major projects. Keep visuals simple and consistent so they are easy to interpret.
Step 5: Write commentary explaining major drivers
For each key metric, draft a few sentences explaining what changed, why it changed, and whether it is likely to continue. Tie observations back to specific projects, markets, or internal decisions where possible.
Step 6: Review draft reports with finance leadership and finalize
Share the draft management report with the finance leader to confirm that it is accurate and that explanations are fair. Incorporate their feedback, finalize the package, and prepare to present it to the broader leadership team.
Lock Prior Year in Accounting System and Archive Workpapers
Step 1: Confirm all year-end adjustments are posted
Before locking the year, review the year-end journal entry list and ensure that all agreed adjustments, accruals, and reclasses have been entered and posted. Check that the final trial balance matches what was provided to external advisors.
Step 2: Run and save final year-end financial statements
Generate the final, official income statement, balance sheet, cash flow statement, WIP report, and key supporting schedules as of year-end. Save them as “Final” versions with clear file names and dates.
Step 3: Lock or close the fiscal year in the system
Use the accounting software’s year-end or fiscal year close functions to lock the prior year. Ensure only a small number of authorized users can unlock it, and understand what steps are required if changes ever become necessary.
Step 4: Organize year-end workpapers and reconciliations
Gather all reconciliations, schedules, checklists, correspondence with external advisors, and management reports into a structured folder (digital and/or physical). Label sections clearly so a new person could find items later.
Step 5: Back up year-end data securely
Confirm that year-end financial data and workpapers are backed up according to company policy, preferably in at least two secure locations. Test that files can be restored from backup if needed.
Step 6: Document year-end close summary and lessons learned
Write a short summary of when the year was closed, any major issues encountered, and improvements to make next year. Store this note with the year-end package and update your year-end checklist based on lessons learned.
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