Accounts Receivable & Payable: What Businesses Should Review Before Year-End

Year-end accounting is an important time for businesses to review their financial records and ensure that outstanding balances are accurate and properly supported.

Two areas that require particular attention are Accounts Receivable (AR) and Accounts Payable (AP).

Accounts receivable represents amounts that customers owe to the business, while accounts payable represents amounts that the business owes to suppliers and vendors.

A proper year-end review of both can help businesses identify old outstanding balances, unreconciled transactions, duplicate entries, missing invoices and potential collection or payment issues before finalising their accounts.

What Are Accounts Receivable?

Accounts receivable refers to the money a business expects to receive from customers for goods or services already provided on credit.

For example, if a business raises an invoice of ₹2 lakh and the customer has not yet paid, the amount generally remains recorded as an outstanding receivable until payment is received.

Before year-end, businesses should review whether these outstanding amounts are:

• Genuine and recoverable
• Correctly recorded
• Supported by invoices and documents
• Properly matched with customer payments
• Correctly classified in the accounting records

What Are Accounts Payable?

Accounts payable represents amounts that a business owes to suppliers, vendors or service providers.

These may include outstanding amounts for:

• Purchases
• Professional services
• Rent and utilities
• Software and subscriptions
• Contractors and vendors
• Other business expenses

At year-end, businesses should ensure that all liabilities relating to the relevant financial period have been properly recorded.

Year-End Accounts Receivable Checklist

1. Review Outstanding Customer Invoices

Prepare a list of all unpaid customer invoices as of the year-end date.

Check:

• Invoice number
• Invoice date
• Customer name
• Invoice amount
• Amount received
• Balance outstanding
• Payment due date

This can help identify missing or incorrectly recorded transactions.

2. Analyse Receivable Ageing

Review outstanding receivables according to their age.

A typical ageing analysis may classify balances as:

• Current
• 0–30 days overdue
• 31–60 days overdue
• 61–90 days overdue
• More than 90 days overdue

Older balances may require additional follow-up and documentation.

3. Reconcile Customer Accounts

Compare the accounting records with customer statements wherever possible.

Look for:

• Missing receipts
• Duplicate invoices
• Credit notes not recorded
• Incorrect adjustments
• Unallocated customer payments

4. Identify Doubtful or Long-Overdue Balances

Some receivables may have remained outstanding for a significant period.

Businesses should review whether there is sufficient evidence supporting their recoverability and consider the appropriate accounting treatment based on applicable accounting requirements.

5. Check Subsequent Receipts

Payments received after year-end can provide useful evidence when reviewing outstanding balances.

For example, if an invoice outstanding at year-end is subsequently paid, the payment can help confirm the existence and recoverability of the receivable.

Year-End Accounts Payable Checklist

1. Review Outstanding Vendor Balances

Prepare a vendor-wise list of unpaid invoices.

Verify:

• Vendor name
• Invoice number
• Invoice date
• Invoice amount
• Payments made
• Outstanding balance

2. Reconcile Vendor Statements

Where vendor statements are available, compare them with the business's accounting records.

This can identify:

• Missing purchase invoices
• Payments not adjusted
• Duplicate entries
• Credit notes
• Unrecorded liabilities

3. Check for Unrecorded Expenses

One important year-end accounting check is identifying expenses that relate to the financial year but have not yet been recorded.

For example, services may have been received before year-end while the invoice is received later.

Such transactions may require appropriate accounting treatment based on the applicable accounting framework.

4. Review Old Outstanding Payables

Long-pending vendor balances should be investigated rather than simply carried forward indefinitely.

Check whether the balance is:

• Genuine
• Already paid
• Subject to dispute
• Supported by documentation
• Still payable

5. Check Vendor Advances

Review advance payments made to suppliers and ensure they are correctly classified and adjusted against the relevant invoices.

GST and TDS Checks

Accounts receivable and payable should also be reviewed along with relevant GST and TDS records.

Businesses should check whether:

• Sales invoices are properly recorded
• Purchase invoices are properly accounted for
• Credit and debit notes are recorded correctly
• GST-related records are reconciled
• Applicable TDS deductions have been accounted for
• TDS payable balances are reconciled
• Vendor/customer balances agree with supporting records

These checks can help reduce discrepancies between accounting books and tax records.

Common Year-End AR & AP Mistakes

Businesses should watch out for:

❌ Duplicate invoices
❌ Missing purchase or sales invoices
❌ Unadjusted advances
❌ Incorrect customer/vendor balances
❌ Old outstanding balances without review
❌ Unrecorded expenses
❌ Incorrect credit/debit note adjustments
❌ Unreconciled payments
❌ Incorrect GST or TDS entries

Practical Year-End Review Checklist

Before closing the books, businesses can use this simple checklist:

Why Year-End AR & AP Review Matters

A detailed review of receivables and payables can help businesses:

• Improve the accuracy of financial statements
• Identify collection issues
• Detect accounting errors
• Identify unrecorded liabilities
• Keep customer and vendor balances updated
• Improve cash-flow visibility
• Prepare better documentation for year-end accounting and audit

Final Takeaway

Accounts receivable and accounts payable should not simply be carried forward at year-end without review.

Businesses should reconcile customer and vendor balances, analyse ageing, verify supporting documents, review advances and check relevant GST and TDS records.

A structured AR & AP year-end review can make the year-end closing process more organised and help businesses identify discrepancies before the accounts are finalised.