Month-End Close Tips and Checklist: For Newbies to Experienced Closers

Whether you need to conduct an internal or external audit on your financial statements, the use of an automation tool will make this easier than ever. In most instances, there’s more than one person involved in the account close process. In fact, the tasks may be spread across regions, and with the rise of remote working, you’ll need to communicate more than ever so that everyone is looped in.

Yet, it’s worth noting this process doesn’t have to be intricate or intimidating. Indeed, the journey becomes considerably smoother with the support of a well-structured month end closing process and disciplined bookkeeping routines. Furthermore, maintaining a consistent pulse on your financial data is key to steering your business toward its long-term objectives.

Step by Step Guide To The Month-End Close Process [Includes a Checklist]

With all the data in hand, it’s time to cross-check and perform account reconciliation to verify accuracy. Account reconciliation compares internal documents with external statements to ensure each line item matches up. This requires that a person (or system) handles pulling together all relevant financial information, with items like the income statement, expense records, a list of transactions, and the like. If there’s no centralised data solution to combine all your systems or spreadsheets, this step can be unnecessarily time-consuming.

The monthly close process is a critical step in the accounting cycle. It provides an opportunity for managers to review and approve financial statements and other reports, as well as make any necessary changes before closing out accounts at the end of each month. Each month your business will undergo an accounting month-end closing process to identify discrepancies, verify business account balances, and generate monthly financial statements. This blog will help you with your first-hand experience on month-end close process. The month-end close process involves accounting teams collecting, reviewing, and conforming transactions and financial activity from the previous month.

Review the petty cash fund

Invoices have been issued, but payment isn’t due until the 15th of next month. So an accrual entry of $200,000 is added to record earned revenue, offset by a corresponding entry to the Accounts Receivable account. When the customer pays their bill next month, the cash entry of $200,000 generates a corresponding drop in Accounts Receivable. Accruals are adjusting entries made to ensure that all transactions that take place within a given period (e.g., a month) are recorded properly. Reconciling accounts payable and accounts receivable in this way is also known as the accruals process, as dictated by accrual-based accounting principles.

• Integrate with treasury systems to facilitate and streamline netting, settlement, and clearing to optimize working capital.
• All you really see is the end result — a set of balanced financial statements, including a Balance Sheet and Profit & Loss Statement, and a general ledger ready for the next accounting period.
• Make sure you sent an invoice to every customer you completed work for during the month.
• By doing so, the year-end closing process becomes easier as you already have all your documents and records neatly in place.
• If multiple teams are involved in the monthly closing process, then keeping track of the status of tasks is going to be a significant pain point.
• Drive visibility, accountability, and control across every accounting checklist.
• So, adjustment entries for any errors have to be done before you close.
• If so, these will need to be added before proceeding with the month-end closing procedures.
• For many finance teams, that data tends to live in multiple spreadsheets.

Accurate monthly financial reports help you improve transparency and track KPIs correctly. BlackLine is a high-growth, SaaS business that is transforming and modernizing the way finance and accounting departments operate. Our cloud software automates critical finance and accounting processes. We empower companies of all sizes across all industries to improve the integrity of their financial reporting, achieve efficiencies and enhance real-time visibility into their operations. Timely, reliable data is critical for decision-making and reporting throughout the M&A lifecycle.

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Depending on your organization, you may have additional adjustments, allocations, and accruals to make. All of these steps need to be part of your regular accounting procedures. Large hassles during the month end closing process might be an indication of underlying issues with your business’s approach to accounting.

Or perhaps your whole team is currently working overtime each month to get the books closed—in which case that extra five days would result in a happier, better rested and more engaged workforce. Keeping the general ledger continuously up-to-date allows your team to do a “soft close” on any day of the month to get a snapshot of the company’s current financial health. This method also reduces the accounting team’s workload during the “hard close” at the end of the month. Month end closing, otherwise known as “financial close,” is the accounting process that results in closing the books on the previous month. Timely entry of data into your software ensures the monthly closing is trouble-free.

What is Month-End Close?

Month-end close is the accounting process of finalizing a company’s financial books and records for the month. It involves reconciling accounts, recording journal entries, preparing financial statements, and ensuring compliance with accounting standards and regulations. Increase accuracy and efficiency across your account reconciliation process and produce timely and accurate financial statements. Drive accuracy in the financial close by providing a streamlined method to substantiate your balance sheet.

Automation ensures data is consistent across departments and compliant with regulations. All these benefits result in improved accuracy, increased efficiency, and enhanced cost savings for organizations. The financial close process at the end of every month helps businesses to keep their accounts up-to-date. It ensures that their data is accurate and can be relied on to prepare annual reports.

How To Find the Best Expense Management System

Unfortunately, this process is time consuming and error prone, so finding an automated solution is essential. The month-end closing process is critical to any business but can be very time-consuming. Creating the right month-end close checklist allows your team to break out of reporting silos and to focus on more strategic business locations. https://www.bookstime.com/articles/month-end-close-process To keep on top of your monthly accounting responsibilities and cut down on time spent closing your books, create a monthly financial calendar. Your calendar can help you prepare for closing your books for the next month. One way to stay organized is by using basic accounting software to track your transactions and store your reports.

• Plan your tax obligations as well to avoid cash flow issues and IRS penalties.
• The month end close process is essential for every business, whether it is a small or large accounting firm.
• To do this, match your records to your account statements from outside entries, such as the bank.
• To avoid this, managing your time and planning the monthly close process on your calendar is helpful.
• The month end close is one of the most important accounting processes for businesses of all sizes.
• The month-end close process helps you to balance books, checks cash, and bank account and prepares financial statements.
• Tools like SaaSOptics automate revenue schedules through CRM integrations and sync invoices to your general ledger chart of accounts structure so you can handle revenue recognition with minimal manual input.
• Therefore, it’s important to double-check all statements before closing the month in order to make sure that financial information is accurate.

Manual accounting tasks, when performed under time crunch and stress, can become error-prone. A human being is likely to make 10 errors in every 100 steps when performing redundant work. Any accounting close activity cannot be expedited because of the possibility of errors, which are unacceptable in the accounting field.

Verify that you have recorded all of the income received from each source of income during the month and recognize missing entries. Review whether or not you have accurately billed your clients, and then take the necessary action. Along with that, you can make more informed decisions based on your company’s financial activities. It positions your executive team to make cash allocations that benefit each department of the company. Review all manual and automated data flows related to revenue recognition and commissions. Test for validity and conduct preliminary walkthroughs with your team to ensure the information makes sense and is consistent across reports.

Be sure that anything in a draft form is taken care of and be aware of any recurring transactions that haven’t gone through. Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles. We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.