Quick summary

• The 1099-NEC deadline is January 31. W-9 collection should start in November, not after December closes.
• Open POs older than 90 days need review before year-end. Anything that won’t result in a receipt should be closed to prevent phantom accruals.
• Duplicate payment rates average 0.1-0.5% of total AP spend at companies without automation. A year-end duplicate check typically finds 4-5x more than daily processes catch.
• The subledger-to-GL reconciliation should be zero. Any difference represents an unrecorded transaction or a posting error.

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Year-end accounts payable work compresses into a narrow window. Vendors are sending final invoices. Finance is closing the books. The CFO wants the accruals list by the 20th.

This checklist covers the 12 areas where AP teams most commonly find problems in year-end reviews. Most of these should ideally be done throughout the year, but if they’re not, November and December are the time.

1. Open purchase order reconciliation

Pull all open POs and match them against received inventory or services. POs that are older than 90 days with no receipt activity need a decision: close them (if the purchase won’t happen) or confirm they’re still active.

Unclosed POs inflate the encumbrance balance and make cash flow projections unreliable. They also create phantom accruals if your system auto-accrues unbilled POs.

Who owns this: purchasing and AP together. Purchasing managers should confirm the status of open POs for their departments. AP should close anything purchasing confirms is dead.

2. Vendor credit and rebate tracking

Vendors issue credits for returns, pricing adjustments, and negotiated rebates throughout the year. At year-end, confirm which credits have been applied and which are outstanding.

Outstanding credits sitting in vendor accounts that don’t have open invoices to apply against become a cash recovery opportunity. They also complicate the balance sheet if left unresolved: they show up as debit balances in accounts payable, which looks wrong on the balance sheet.

Check each vendor account for debit balances. Request payment for credits that exceed $500 and have been outstanding more than 60 days.

3. Duplicate payment detection

Duplicate payments happen when the same invoice is processed twice with different reference numbers, or when a vendor re-sends an invoice and it gets processed without matching against the original.

Industry data from IOFM (Institute of Finance and Management) puts duplicate payment rates at 0.1-0.5% of total AP spend for companies without automated duplicate detection. For a company spending $10 million in AP per year, that’s $10,000-$50,000 in overpayments.

Year-end review method: extract all payments for the year and filter for same-vendor, same-amount, same-period combinations. Review manually for any that look suspicious.

If your AP software (BILL, Tipalti, Stampli) has duplicate detection built in, run the year-end report anyway. Automated detection catches duplicates at entry time. Year-end review catches duplicates where invoice numbers were different but the underlying transaction was the same.

4. W-9 collection and 1099 prep

The 1099-NEC deadline is January 31 for both IRS filing and recipient copies. That means you need to have W-9s collected, amounts verified, and 1099s prepared by mid-January at the latest.

Start in November. Generate a list of all US vendors paid $600 or more during the year. Cross-reference against your W-9 file. Any vendor without a current W-9 needs one before year-end close.

Common 1099 mistakes:

• Forgetting payments made through credit card (these are reported by the card company, not you, on Form 1099-K)
• Including rent payments to corporations (rent to individuals gets a 1099, rent to corporations generally does not)
• Misclassifying the payment type (legal services always get a 1099 regardless of entity type)

If you have significant contractor spend and have not been collecting W-9s systematically, now is the time to set up a process. AP platforms like BILL and Tipalti have W-9 collection built into the vendor onboarding flow.

5. Accruals for received-not-invoiced items

Goods received or services performed by December 31 belong in this fiscal year even if the invoice arrives in January. These are received-not-invoiced (RNI) accruals.

The process: match open POs against receiving records at December 31. For any PO with a receipt but no invoice, estimate the accrual based on the PO amount or the amount specified in the receiving document.

Document the basis for each accrual. Auditors will ask how you calculated the amount. “We estimated based on the PO price” is fine. “We guessed” is not.

6. Accounts payable subledger to GL reconciliation

The AP subledger (total of all open invoices in your AP system) should equal the accounts payable balance in your general ledger. Any difference is an error.

Common causes of reconciliation breaks:

• Manual journal entries that credit AP without going through the AP subledger
• Payments posted directly to the GL without recording in AP
• Vendor credits applied in the GL but not in the AP system

This reconciliation should be done monthly. If it hasn’t been, year-end is when you pay the price. The journal entry to force the two into agreement without finding the root cause will come back as an audit finding.

7. Aged AP review

Pull your aged AP report at December 31. Review anything over 60 days. These fall into three categories:

Disputed invoices: invoices you’ve received but haven’t paid because of a discrepancy. Each should have documented status. If the dispute has been resolved but the payment is still outstanding, it should be paid or the invoice should be closed.

Missing approval: invoices caught in an approval queue. Chase the approver. If the goods or services were received, the invoice should be approved and paid.

Vendor relationship hold: vendors on payment hold for account or contractual reasons. Document the reason and expected resolution date.

Aged payables over 90 days also need review for whether they’re still owed. Some older invoices, especially from vendors you no longer work with, may have been effectively forgiven. Talk to your controller about the accounting treatment.

8. Prepaid expenses reconciliation

Prepaid expenses are payments made for services that haven’t been fully delivered yet. Annual software subscriptions, insurance premiums, and prepaid rent are common examples.

At year-end, confirm the remaining prepaid balance for each item matches the expected amount. If you paid $120,000 for an annual subscription in July, the December 31 prepaid balance should be $60,000 (half the year remaining).

Unreconciled prepaids overstate assets and understate expenses, which affects both the income statement and balance sheet.

9. Recurring payment review

Pull all recurring payments set up in your AP system or bank (ACH debits, auto-pay credit card charges, scheduled wire transfers). Confirm each is:

• Still valid (vendor relationship is active)
• At the correct amount (prices haven’t changed without a corresponding update)
• Authorized by the correct person (employment terminations can leave orphaned auto-pays)

Recurring payments are one of the most common places for obsolete or unauthorized payments to hide. A 15-minute review against your active vendor list finds most of them.

10. Approval workflow audit

Review your AP approval workflow setup. For each approval threshold, confirm:

• The designated approver is still employed and in the correct role
• Backup approvers are set up so invoices don’t stall when someone is out
• The approval thresholds still match your internal controls policy

If you’ve had any organizational changes during the year (promotions, departures, restructuring), the approval workflow often gets missed in the transition. Year-end is a good time to confirm it reflects current roles.

11. Fraud verification

AP fraud takes several forms: fictitious vendor invoices, duplicate payments, vendor master manipulation, and unauthorized payment approvals.

Year-end fraud review steps:

• List all new vendors added in the last 12 months. Verify each with a legitimate business record (website, registration, prior relationship).
• Check for vendors sharing addresses or banking details with employees (a classic embezzlement pattern).
• Review payments to vendors with invoice numbers that are sequential or suspiciously simple (real vendors don’t issue invoice #1, #2, #3 to you).
• Confirm that any vendor whose banking details changed in the last year was verified through a callback to a number on file, not a number provided in the change request.

12. Document archiving

By December 31, confirm your AP documentation retention is current:

• All paid invoices for the year are attached to the corresponding payment record in your AP system
• Physical invoices (if any remain) are scanned and filed
• Bank statements are archived
• All AP-related contracts, purchase orders, and receiving documents are accessible

The IRS requires keeping business records that support tax returns for 3-7 years depending on the type of record. AP records generally fall under the 3-year general rule, but records supporting capital expenditures or long-term contracts may need longer retention.

Frequently asked questions

When should I start year-end AP close? Ideally, November 1. W-9 collection, open PO review, and aged AP cleanup should all start in November. The actual December 31 close activities (accruals, final subledger reconciliation) happen in the last two weeks of December.

What’s the biggest risk of skipping the duplicate payment check? Overpayments. Recovering duplicate payments after year-end is harder than catching them at close. Vendors are slower to respond in Q1, and the amounts get harder to track as activity accumulates. Most AP automation platforms (BILL, Tipalti, Stampli) have duplicate detection, but a year-end manual review still catches things automated systems miss.

How detailed do accruals need to be for audit purposes? Each accrual should have a description, the basis for the estimate (PO amount, contract rate, prior period actual), and the expected invoice date. Auditors look for evidence that you made a reasonable estimate, not that you guessed. For material accruals (over $10,000), having a supporting document or email from the vendor confirming the amount is ideal.

Do I need to send 1099s to vendors I paid via credit card? No. Payments made by credit card, PayPal, or other third-party payment networks are reported by the payment processor on Form 1099-K, not by you on Form 1099-NEC. Tracking this distinction prevents double-reporting.

What do I do with vendor invoices that I think might be fraudulent? Do not pay them and do not contact the vendor using contact information on the invoice. Reach out to the vendor through contact information you have on file (from your vendor master or prior correspondence). If the invoice turns out to be fraudulent, file a police report and notify your AP software provider. Document everything.