A Month End Closing Procedure For Every Business

Let’s take a look at some real-life examples of companies that have successfully automated their month-end close process. First and foremost, provide comprehensive training sessions that cover all aspects of the automated system. what is marginal revenue formula to calculate This includes teaching employees how to input data, generate reports, and troubleshoot any issues that may arise. Make sure they have a clear understanding of how this new tool will integrate with their current workflows.

• Some small business owners underestimate the importance of the month end close process.
• With an automation solution deployed, visibility is made easy as the system tracks every step of the process and can alert the responsible party should an action item be needed.
• The process is a bit different depending on whether you’re using QuickBooks Desktop or QuickBooks Online, so we’ll go through those close processes separately.
• A month-end closing checklist is a list of tasks that needs to be completed before closing the monthly financial books.

You need to know exactly where things stand to offer accurate reports to your board leaders and executive suite. Vasco noted how Mosaic has been instrumental in building out quarterly board decks and running flux analysis to compare financials period over period. Knowing about the major one-off expenses coming down the pipeline is crucial for marketing, finance, and accounting alignment.

By understanding its importance and utilizing my checklist, you can find success in your month-end process. At the end of closing, review your process to identify any areas of improvement, and share it with your team. You should hold a team meeting before the start of each closing and make sure each department (i.e., A/R, A/P, Payroll, etc.) is aware and bought-in to the project timeline.

Benefits of Automating the Month-End Close Process

The month end closing ends when the previous month has been set in stone and no new transactions are recorded on it. The person reviewing the closing documents is not directly tied with the closing process up until this point and has a chance to look at everything with fresh eyes. The mere act of going over your financial statements can give you intel into what you’re buying and whether you’re getting a proper return on your investment. They are also an indicator of overspending and other budgetary issues. Reconcile your cash accounts first, which are easier to process since discrepancies and mistakes are apparent when you’re dealing with cash.

Teams need to get out of this vicious cycle by mapping out a more streamlined timeline. The entries in your financial statements must match the entries from bankers, vendors, and other entities. Most accounting teams can provide answers due to their direct involvement in all the processes. Now that you’ve collected your financial reports, you have an opportunity to make changes to your business. It helps you with spend management and risk management, ensuring the company’s financial health.

Proven Bookkeeping Basics For Small Businesses

This consists of a series of steps completed at the end of every month to ensure that all financial transactions have been properly accounted for. Finance professionals have dreaded the month-end closing process, and there’s no denying that it is a time-consuming process that must be done accurately and timely. That requires cultivating a broader range of relationship skills today, such as how to work in a team and how to engage with other departments. If other departments are aware of what you are doing and what you’ll need for each month-end in advance, they may be more willing to contribute the financial data you need on time. The process may be different for various companies for many reasons.

What should your month-end reports contain?

Once you close your books, you can’t go back and create journal entries for that month. So make sure your financials are accurate before closing the accounting period. The month end close process ensures you have information about your company’s financial standing. It’s crucial for helping you make short-term decisions, in addition to helping you work towards long-term goals. Plus, having accurate monthly reports makes your year-end close much simpler.

Maintain open communication with all relevant team members, departments, and stakeholders. Use project management software to split the close process by department. I used Microsoft Project to plan my month-end closing, and it helped me ensure the workload was distributed evenly to not overburden any employee. Artificial intelligence and machine learning can be advantageous here; technology saves time and reduces the risk of human errors.

Documenting the process helps teams create uniformity, identify errors, and operate with an effective workflow for monthly, repeatable success. Establishing a series of steps and assigning roles for different closing tasks sets expectations and provides clarity throughout the process. It also allows team members to pick up tasks quickly if someone is unavailable or out of the office. Streamlining the process also means teams can address any issues early in the closing process rather than waiting until after all data has been posted. In 2022, Ventana Research found that the month end closing process took businesses an average of six plus days to close their books.

Assume that a small retail store called “Green Goods” wants to keep track of all its incoming cash to monitor its financial performance. Cash on the trial balance must correspond with the ending cash balance on the bank statements. Automated payment reconciliation, built-in employee debit cards, and seamless approvals can all be done using the power of Spendesk. Customers say that our software saves approximately 4 days’ worth of work at the end of each month. Your finance team should make a journal entry to record each of these transactions. Take a few pages out of WeWork’s playbook and learn how automation can solve some of the greatest challenges facing your finance team.

If you’re struggling to keep up with your books and the month-end close process, you can outsource your bookkeeping to Bench. Your accounts payable only captures short-term payables to creditors. Reconciling accrued expenses will help you stay on top of all invoice payments and dues within a year.

Compliance and Regulatory Challenges

So, a final review is always done before the closing process is completed. This review is done by the top management or someone who wasn’t involved in the closing process to get a fresh view of all the data once again. It ensures that there aren’t any mistakes in the monthly financial statements. Now that you have all the information in place and have verified them, it’s time to prepare your financial statements.

But even if you’re accessing digital accounting software or online programs, it’s important to back up all of your documents. The monthly closing process provides an organized way to ensure accounting accuracy and efficiency. The trial balance or the beginning balance for the next month needs to be reviewed by another coworker or superior. It is a safeguard for your process, to rule an accurate start to next month This step concludes with polished financial statements. Still, the closing process requires input from various stakeholders to verify everything is accounted for and recorded accurately.

Some companies use the term because the month end close requires the reconciliation of a range of accounts. You can’t know the answer if you’re not tracking your accounts payable balance. Examine your checking and savings accounts, loan and credit accounts, and digital accounts, such as PayPal.

By doing so, the year-end closing process becomes easier as you already have all your documents and records neatly in place. To properly close your books for the month, you’ll need to close out both revenue and expenses. Doing so ensures that next month’s balances are accurate in the general ledger. Refocus your teams on analysis by replacing repetitive, spreadsheet-heavy work with leading-practice automation.