Month-End Close Process: Flowchart, Checklist, FAQ

month end closing process

Use our month end closing checklist to streamline your closing procedures. By analyzing your numbers and implementing learnings, you can drive your business to success. Proper record-keeping is key to creating a good accounting system. With up-to-date records, you will minimum level of stock explanation formula example save time catching up with your financials during the month-end process. They can analyze your numbers and give you insights to make good business decisions. If you’re fighting for time, aim to catch up with your reconciliation ahead of the month end close process.

It involves several steps, including reconciling accounts, reviewing transactions, adjusting entries, preparing financial statements, and analyzing performance. The month-end close process is a set of steps that closes your books at the end of the month to set your numbers in stone. Including a monthly closing process in your regular accounting procedures ensures that your numbers are reliable, stable, and accurate. Now that you have all the information in place and have verified them, it’s time to prepare your financial statements. These include the balance sheet, income statement, and cash flow statement.

But there’s a lot that needs to be done before those few closing entries can happen. Journal entries for depreciation and amortization need to be calculated and posted. 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. Financial statements include the income, balance sheet, and cash flow statements. These statements accurately reflect the company’s financial position and the results of financial operations for the month.

month end closing process

They are an asset you’ll recognize as expenses in different accounting periods. With account reconciliations, you’ll spot mistakes in your financial data and fraudulent transactions (if any!). The entries in your financial statements must match the entries from bankers, vendors, and other entities. You can’t know the answer if you’re not tracking your accounts payable balance. As such, it’s a good idea to ask somebody who didn’t prepare your accounts to take a look at them. Have this person check all financial statements, as well as your general ledger.

Step 5 – Review Your Inventory

For instance, having an accurate monthly report makes year-end closing much more straightforward. As you grow, hire a small accounting team to help you with the accounting procedures and financial reporting. That way, you can delegate your accounting procedures and appoint responsible parties instead of doing it all by yourself.

  1. When everyone in your firm works with a template that shows them what they need to do at every step, your firm’s month-end projects will consistently satisfy your clients.
  2. It involves several steps, including reconciling accounts, reviewing transactions, adjusting entries, preparing financial statements, and analyzing performance.
  3. Besides having a well-thought-out plan and month-end workflow, let’s review some best practices that can help make your end-of-the-month processes go as smooth as possible.

If you fall behind, catch up on your backlog ahead of the month end process. With a month-end closing checklist and a bookkeeping habit, you can scale the summit with ease and manage your finances well. More importantly, staying on top of your financial data will help you achieve your long-term business goals. Track the condition of these assets and record any expenses related to them. Of course, you should account for purchases when you review fixed assets too.

Understaffed Accounting Teams

If you overstock, you’ll trap money unnecessarily in inventory and risk wastage. Likewise, if you understock, you’ll risk production losses, missed revenue, and reputational damage. Review your accounts receivable to see if your customers are paying within the agreed credit term.

month end closing process

If the financial documents required for the month-closing process are stored in different locations, it will be cumbersome to access them quickly. So, a centralized repository is recommended to ensure the smooth collection of data. All fixed assets that a business might have, like equipment, technology, storage, housing, vehicles, etc., need to be assessed. It is also essential to consider that these assets depreciate, and the depreciation amount needs to be categorized under expenses. After collecting all the data, it needs to be cross-checked with receipts, bank statements, and other sources of information that the business might have. It is important to note that the month-end close is an official process to finalize the balance sheet numbers.

But, business leaders want to streamline and make the process faster as the month-end close numbers act as a starting point for the plans for the upcoming months. For business owners with no expertise in this area, you might consider partnering with an experienced accountant, bookkeeper, or accounting firm for the chart of account set-up. This simple step could help you achieve an optimal balance between financial data collection and reporting detail. As you can see, with the progression of time and evolution of technology, the account close process can be shortened. With automation solutions, you don’t have to sacrifice accuracy for speed because you gain both when using financial automation software.

Human Errors Resulting From Manual Work

The month-end close process is a series of steps that are taken to ensure the accuracy and completeness of an organization’s financial statements at the end of each accounting period. To use your financial information as an effective planning and strategic tool, you need to get into a regular cadence of closing your books. In this post, we’ll first give an overview of the closing process and provide you with a month-end close checklist. Next, we’ll go into the specific steps for closing the books in QuickBooks, NetSuite, and Sage Intacct. It spots any irregularities or issues and helps to ensure compliance with financial reporting standards and regulations. The month-end closing process is an essential part of the accounting cycle and helps to ensure the integrity and reliability of a company’s financial information.

Next, review if you’ve invoiced all your customers accurately and send any missing invoices. Small business owners have their plate full with daily business operations, so it’s normal to dread the month-end admin. Collectively, you can use these documents to create a trial balance. No matter where the cash comes from, you need to have a record of it. That means verifying that you’ve sent invoices and cross-checking which invoices clients have paid.

That may include a bloated chart of accounts where much time is spent tracking information, but where reporting against it provides little business value. Accounting systems aren’t homogenous entities; they usually come in modules covering specific purposes such as an accounts payable and an accounts receivable department. Part of the closing process is reconciling all these components together. The process involves checking receipts, invoices, and other documents to match the client’s income and expenses to their physical records. Wherever your team is in that spectrum, a comprehensive checklist that includes all the processes and assignments is a must in order to streamline the closing process.

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