Month-End Close Process: Checklist, Best Practices, and More
Ensure all transactions on bank and credit card statements align with the general ledger. Month-end close requires input from HR, payroll, procurement, and other teams. When there’s misalignment or poor communication, finance teams often lack the data they need on time. That’s why having a well-structured month-end close checklist is essential. In this guide, we’ll walk through the close process, identify common mistakes, and share best practices to streamline your month-end close process. This is not an offer to, or implied offer, or a solicitation to, buy or sell any securities.
Revenue Recognition
Staying on top of your numbers and closing your books every month is important to keep your business on the right track. By preparing ahead for the month-end, you’ll avoid the last-minute rush and have a smooth closing process. They are an asset you’ll recognize as expenses in different accounting periods.
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From data issues to cultural pushback, learn what’s holding teams back and how to move forward. The best approach uses standardized accrual templates and maintains detailed support that can stand up to audit scrutiny. Regular check-ins with department heads help you spot new or unusual expenses that might slip through the cracks. This communication prevents surprises that can derail your closing timeline. Expense accruals capture costs that have been incurred but haven’t hit your books yet.
Prepare financial statements
It complements the income statement and balance sheet by showing the business’s liquidity and solvency. This statement summarizes a company’s revenues and expenses over the monthly period, culminating in net income or loss. It offers insights into the company’s operational performance and profitability. Reviewing general ledger accounts for unusual or miscategorized transactions completes preparation.
- It’s important to not skip this step, as analysis is essential for guiding future planning.
- The monthly closing process provides an organized way to ensure accounting accuracy and efficiency.
- The month-end close process is a monthly workflow where finance and accounting teams review, reconcile, and finalize financial transactions for the previous month.
Month-end closing is among the most critical accounting processes for every business. Rushing through it and making mistakes won’t help, especially if these statements will be referred to for your year-end close. Accurate monthly financial reports improve transparency and help track KPIs correctly. A month-end closing checklist lists tasks that must be completed before closing the monthly financial books.
Month-end close checklist template
The allowance method is commonly used to estimate this expense, often based on a percentage of sales or an aging analysis. This adjustment ensures accounts receivable are reported at their net realizable value, reflecting a more accurate financial position. You should review your month-end close process quarterly or biannually to ensure it stays efficient and aligned with evolving business needs. Regular updates to your accounting monthly close process help identify bottlenecks and optimize month-end regulatory accounting ethics. Sticking to a consistent schedule for releasing financial statements every month can help you better organize your team’s time and activities. Further, adopting automated accounting solutions can help you make a day-zero financial close through immediate and accurate decisions.
Accurately forecasting cash flow predictions, making strategic business decisions, and financial planning all depend on a successful financial closure. The monthly closing process provides an organized way to ensure accounting accuracy and efficiency. After all the stages have been accomplished, your month-end closing process is finished and you can officially close the period. This means updating the company’s accounting records to reflect the end of the period and preparing for the next period. Store all financial statements, account reconciliations, and supporting documentation in a centralized location. Have senior finance personnel review the general ledger, journal entries, and financial statements.
- If you’re struggling to keep up with your books and the month-end close process, you can outsource your bookkeeping to Bench.
- Examples include accounts receivable aging reports, detailing customer balances by age.
- Organizations with efficient processes typically complete their close within 3-5 business days compared to the industry average of 6-10 days.
- Whether you’re looking to tighten controls or just speed things up, you’re in the right place.
This lack month end close process of ownership can delay the month-end close process and complicate issue resolution. Accounting automations can reduce out-of-policy and non-compliant spend before it’s too late. Brex AI doesn’t just catch discrepancies and anomalies — it prevents them from happening in the first place.
Clear procedures for each revenue type and detailed documentation help auditors and stakeholders understand your approach. Taking these simple steps before starting your month-end close process will help to ensure its success. In this guide, we’ll break down exactly how the month-end close process works, why it matters, and what a well-organized checklist can do to streamline your team’s efforts. Whether you’re looking to tighten controls or just speed things up, you’re in the right place.
A systematic approach eliminates last-minute panic and keeps accuracy intact. To make a successful month-end close, accounts from the prior month require reconciliation and all transactions must be posted accurately into company’s financial books and records. Manual entry and spreadsheet-based tracking are time-consuming and increase the risk of human errors. Automating month-end closing procedures, such as account reconciliations and financial report generation, can dramatically improve efficiency and accuracy. Modern accounting automation solutions can generate these reports automatically, pulling data directly from your financial software.
Reconcile bank accounts and statements
Or, you might see that a particular product line is becoming more profitable, suggesting an opportunity for increased investment. This involves comparing current results to previous periods and budgets, calculating key financial ratios, and identifying significant patterns. Double-check that revenue has been recognized in the correct period and that all your expenses are properly categorized.