4 Reasons Why Your Month End Close Process Is Inefficient

The IRS states you must clearly report income for an accounting tax year, and have the paperwork to back it up. The GAAP Principle of Periodicity acknowledges a financial closing procedure as a consistent method for reporting accounting periods. While most accounting teams prepare their entries at the end of an accounting period, they may be prepared whenever an accountant deems appropriate. The closing of books at the end of an accounting period offers companies insightful data about their financial status and accurate financial forecasts.

Make sure your receipts and records match the balance of your petty cash fund. Start with one of the above categories and work your way to the others. Divvying up the records when reconciling your bank statement can help you stay organized and catch errors at month-end. Compare your invoices with your records to make sure you aren’t missing any customer payments. Make sure you sent an invoice to every customer you completed work for during the month. So, how can you simplify your responsibility of closing your books monthly?

What are the 6 Steps in the Month-End Closing Process?

Before you start adjusting, perform a flux analysis on the balance sheet and the P&L. Compare the accounts in the month you are closing with the previous month. After the close is final you should be able to explain any major money changes or new transactions. Part of the document collection process is updating our vendor list, to include only approved vendors.

You also need to record all expenses for the month, including all purchases and bills. Like with accounts payable, all transactions must be verified using the relevant documents – like expense reports and card statements. Once verified, each transaction should be recorded as a separate journal entry. Exactly how the month-end close process is carried out depends on the company, of course, but some steps are common to all. Ideally, the first step is to facilitate collecting and recording data as needed without waiting until the end of the month to start collecting receipts, invoices, bank statements, etc. An essential activity in the monthly closing is checking inventory levels.

Revenue Recognition and ASC 606

Finding a system that can automatically transfer data from one system to another is a great way to smooth out the month-end closing process. Even small mistakes in financial statements can lead to big problems when the information rolls into planning. In addition to your company’s audit readiness at the end of the month, a checklist also helps you prepare Intuit Bookkeeping Expert Careers Remote Bookkeeping Jobs Quickbooks Live your annual financial statements. Implementing a month-end closing checklist increases efficiency and accuracy, reducing the time, effort and expense involved in preparing for year-end audits. The month-end close involves your finance and accounting teams collecting, reviewing and reconciling the previous month’s transactions and financial activity.

• Email your stakeholders for any pertinent information needed to contextualize the close process.
• This step also makes you aware of how much cash you have on hand as a business.
• But accounting for every transaction is key to avoiding discrepancies in your financial data.
• Without the right tools, your organization’s processes will become less effective and you will lose insight.
• These steps ensure that your financial statements accurately reflect the business’s financial position at the end of each accounting period.
• Only when you complete the above steps can you generate the statements.

So, a centralized repository is recommended to ensure the smooth collection of data. Reconcile the 2 to reflect expenses paid and income received for the month. Furthermore, check https://adprun.net/10-benefits-of-having-professional-bookkeeping/ your prepaid accounts against your expense accounts to prevent duplicate payments. Work through your accounting systems to ensure you’re making invoice payments on time.

Simplify Your Month End Close Process with These 10 Easy Steps

These errors can be costly as inaccurate financial statements negatively affect the business. The month-end close process involves accounting teams collecting, reviewing, and conforming transactions and financial activity from the previous month. It is used to ensure accuracy and compliance while maintaining data integrity for financial planning and analytics. Have you ever wondered about the intricate details of this process?

• Because it takes time and effort, the month end close process can be stressful.
• It’s neither glamorous nor particularly enjoyable for many, but month-end close is essential to the health and happiness of not just your accounting department, but your entire organization.
• On the other hand, without a systematic way to balance the books, you may encourage employees to look for shortcuts to their responsibilities.
• It is the ultimate accounting software solution for bookkeepers, accountants, CPAs, business owners, and other accounting professionals.
• This month-end close process flowchart should give you a high-level idea of what a high-growth B2B SaaS company like Gem has to cover each period.

Together, we provide innovative solutions that help F&A teams achieve shorter close cycles and better controls, enabling them to drive better decision-making across the company. Working capital, cash flows, collections opportunities, and other critical metrics depend on timely and accurate processes. Ensure services revenue has been accurately recorded and related payments are reflected properly on the balance sheet. When you are in a cash crunch, who do you turn to for more funding? Plus, with every successful round your investors also want to keep tabs on the business.

Account reconciliation

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. To save time and energy in every month-end closing process, schedule a demo of Order.co. Create a deadline to complete your closing procedures, depending on your business and your team’s workload. For example, you can use accounting software and scan your receipts in real-time to make your month-end a breeze.

• But whether you’re a seasoned professional or a new accountant taking on the task of closing the books, having these practices in mind will help you hit the ground running.
• The month-end close lets your teams track all your monthly business transactions.
• While you may have multiple systems in place to help run your business, it is more likely that they will ultimately run independently.
• Other than the sizable amount of work to do, managing the process and data make this procedure even more challenging.
• If your system supports barcoding, RFIDs, or other information management protocols, physical inventory counts will be even faster, since all items will be tracked in the system in real time.

Check if you have included all sales revenue and incomes from investments, rentals, etc.. You should check for the inclusion of payment of all bills, business travel expenses, supplier payments, and payroll. Check if the debit and credit entries are posted and review journal entries. 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.