Year-end doesn’t have to be scary. If you’ve been closing monthly, the annual close is simply a thoughtful final review – not a firefight. Consistent month-end discipline turns year-end into a smooth wrap-up: you confirm accuracy, prevent discrepancies, and finalize the financial story of your year.
Below is a clear, field-tested workflow to follow in QuickBooks Desktop.
The Big Picture
We’ll move through three lanes:
- Tidy your month-end fundamentals
Reconciliations, uncleared items, and discrepancy checks. - Review the Profit & Loss—by quarter
Spot trends and fix misclassifications (prepaids, deferred revenue, item mapping, capitalization, accruals). - Tune the Balance Sheet
Clean up AR/AP, inventory, prepaids, and fixed assets.
We’ll finish by locking the file and budgeting for next year.
- Monthly Close Fundamentals (Before You Go “Year-End”)
Reconcile Every Balance Sheet Account
Fourlane trains teams to reconcile all balance sheet accounts, not just bank and credit cards. In Reports ▸ Banking ▸ Previous Reconciliations, confirm each account’s last reconciliation. If December isn’t done, note it and continue cleanup.
Red Flags
- Accounts never reconciled (e.g., savings, credit cards)
- Big gaps since the last reconciliation
Clear Uncleared Transactions
From your last reconciliation report, review Uncleared items:
- Stale checks/deposits → decide to void in the current period (December), reissue, or contact the vendor/customer.
- Consider materiality and effort to resolve.
Clearing these keeps your data clean and prevents confusion when posting year-end entries.
Check the Reconciliation Discrepancy report
Reports ▸ Banking ▸ Reconciliation Discrepancy shows changes to cleared transactions—the #1 reason opening balances don’t match next month.
- Use Customize ▸ Last Modified By to see who changed what and when.
- Investigate deletions and edits to dates/amounts. Cleared items shouldn’t be altered.
2) Review the Profit & Loss (Quarterly, Not Monthly)
Switch your P&L to This Fiscal Year with Columns by Quarter. Quarterly views stop “penny hunting” and surface real issues.
Revenue: Investigate Big Swings
If Q4 spikes, ask why. Valid reasons include seasonality—or:
- Deferred revenue recognized too soon (invoices recorded before delivery).
- Entry: Dr Sales/Service Revenue, Cr Deferred Revenue (liability).
- Item mapping errors (items pointing to the wrong GL).
- Date errors on invoices.
COGS: Should Track Revenue
If COGS jumps while revenue doesn’t, drill down for miscoding or timing issues.
Expenses: Hunt for Prepaids, Capitalization, and Accruals
Focus on categories that balloon in Q4:
- Dues & Subscriptions / Insurance
- Annual payments made in December are prepaids, not December expense.
Move to a Prepaid asset and amortize monthly starting with the service period.
Pro Tip: Memorize monthly JEs with clear memos and vendor links.
- Office Expense Hiding Fixed Assets
Set a capitalization threshold (e.g., $2,500 or your policy).
Computers, furniture, and equipment over that threshold belong in Fixed Assets, not expense. - Payroll Accruals
If a biweekly period covers December days but pays in January, accrue wages (plus benefits/payroll taxes if material).- Entry: Dr Wage Expense (split COGS/Overhead as needed), Cr Accrued Wages.
3) Balance Sheet Tune-Up
Run the Balance Sheet by quarter and review these buckets:
Accounts Receivable (AR)
- Target >60 days past due for write-off review.
- Best practice: Create a Write-Off item mapped to Bad Debt Expense, issue a Credit Memo (explain the why), and apply it to close the invoice cleanly.
Accounts Payable (AP)
- Clear bills you don’t owe (credits, duplicates, resolved disputes) before year-end.
Prepaids
- Confirm annual/advance payments have amortization schedules (memorized JEs) and vendor details in the memo.
Inventory
- Do a physical count at year-end if not done more frequently.
- Fix negative quantities and dating issues (often selling before receiving).
- Ensure the inventory subledger equals the Balance Sheet—avoid “cleanup” JEs that break the tie-out.
Fixed Assets
- Reclass capital purchases from expense to the right fixed-asset accounts.
- Coordinate with your tax preparer on depreciation and placed-in-service dates.
Lock It Down & Plan Ahead
- Close/Lock Prior Periods in preferences so earlier numbers can’t be changed accidentally. Add a closing password.
- Document Adjustments (who, what, why) in a simple year-end memo – future you (and your CPA) will thank you.
- Budget Next Year
- Start with the quarterly revenue/COGS trends you just validated.
- Layer in known increases (subscriptions, insurance, headcount).
- Map cash cadence: payroll cycles, debt service, tax payments, major renewals.
- Create a backup before you close, so you always have a restore point.
Year-End Close Checklist
Reconciliations
- Reconcile every balance sheet account (bank, credit cards, loans, payroll liabilities, sales tax, suspense/clearing, etc.)
- Review Uncleared Items and resolve stale checks/deposits
- Run Reconciliation Discrepancy and investigate edits/deletions to cleared transactions
Profit & Loss (Quarterly view)
- Explain revenue spikes/dips; fix item mapping/date issues; defer revenue if needed
- Ensure COGS trends with revenue; resolve mismatches
- Identify prepaids (subscriptions, insurance) and set amortization
- Accrue payroll for December days paid in January
- Reclass capital purchases from expense to Fixed Assets (follow your threshold)
Balance Sheet
- AR: write off >60-day uncollectibles with credit memos (document why)
- AP: remove bills you don’t owe; apply vendor credits
- Inventory: physical count; resolve negatives; tie subledger to GL
- Prepaids: confirm schedules and vendor links
- Fixed Assets: capture additions; prep for depreciation
Wrap-Up
- Lock prior periods with a closing password
- Save a Year-End Close memo (what changed, why, who)
- Build next year’s budget and cash cadence
Final Thought
Year-end is just your monthly discipline – zoomed out. Use the quarterly lens to see trends, put timing items (prepaids/deferrals) in the right periods, and clean the Balance Sheet so it tells the truth. If you’d like help building a month-end checklist or want a second set of eyes on your year-end file, Fourlane is here to help.
You can also view our QuickBooks Deep Dive: How to Manage a Year End Close in QuickBooks Enterprise and Best Practices on our Fourlane YouTube channel.
