Step-by-Step Guide to Month-End Close + Free Checklist

Fixed assets are things like real estate, cars and trucks, and other similar large assets. This step will let you see 1.) if any invoices are outstanding, and 2.) where your sales for the month, and the year, stand. Precoro Blog is where Finance and Procurement professionals get advice, tips and news to streamline the business purchasing process. Ways to make sure your company’s purchase orders are managed smoothly, cost- and time-efficiently, with the best procurement practices brought to life. In addition to that, companies that do not automate their work can find themselves highly dependable on the physical presence of employees at the office at the same time. That might be an issue with the focus shifted towards work environment flexibility.

For starters, tracking inventory monthly allows you to better see your inventory shrinkage, that is, loss due to theft, breakage, spoilage, etc. By making sure that you have properly invoiced customers, you will be able to apply incoming payments against those invoices. The key reconciliation point here is to make sure that customer payments received are applied to the correct outstanding invoice. Let’s not put the cart before the horse; to do this process every month, it really helps to have a clear understanding of why you should take the time and effort to do this. A complete guide on purchase order process steps, the best optimization practices, and ways POs make a difference in your business operations and expenditures. If there is no clear workflow and division of duties, the month-end close might be inefficient and unnecessarily time-consuming.

Prepare for the next month-end close

After you have made all the appropriate entries, performed all reconciliations, and recorded accruals, it’s time to print your preliminary reports. At this point, it is important to review your reports for reasonableness. It’s a good practice to distribute these preliminary reports to a few trusted reviewers who can assist you in checking for errors and raise questions when appropriate.

Maximize working capital with the only unified platform for collecting cash, providing credit, and understanding cash flow. Transform your accounts receivable processes with intelligent AR automation that delivers value across your business. While you may lack the resources to hire more staff, training some employees for crucial steps in the closing process may be a viable option. As long as an experienced financial professional or manager takes responsibility for month-end closing, this alternative can work for your business.

You want to know what the source of your business is for each month. As you begin to track this information, you can see trends – and you can capitalize on those trends to turn them into opportunities. Finally, you’ll need to adjust short-term vs. long-term notes payable so that your balance sheet reflects these amounts in the appropriate categories.

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Always have a record of daily operational transactions, ideally the moment they’re made rather than waiting until the end of the month. Learn how to overcome AP issues by optimizing your purchasing process
for today’s business reality. In addition, doing inventory monthly allows you to see what is selling and what needs to be re-ordered.

• Get up and running with free payroll setup, and enjoy free expert support.
• You can also check your account statements for evidence of fraudulent transactions.
• This reminds employees that timely submissions are critical and that accuracy is important.

Review all month-end accruals and track coverage for the next month. That’s why we emphasize a solid flow in closing each month, from when the team begins gathering economic and accounting profit formula information to crossing the finish line with the final financial report. The second tab is an Example of an in-process month-end close checklist.

During the monthly closures accountants and financial teams analyze various financial operations and aggregate information from many sources, which can make the whole process overwhelming. Having a checklist for the month-end close can help to ensure that nothing is missed and that all the key steps have been checked. If you have accounting software, generate these reports automatically to avoid manual work, minimize mistakes, and save time. Reporting based on month-end closes can make both yearly report preparation and tax filing much simpler. Monthly reports also streamline yearly audits by reducing the time, effort, and expenses required to complete the audit. While it may feel redundant to repeat this process every 30 or so days, it’s important for every business that wants to think of the big picture.

Key Month-End Tasks to Include in Your Checklist

If you find the deadline for releasing financial statements unrealistic, then consider adjusting the timeline or the workflow to rid of the process bottlenecks. These also improve a company’s financial health by helping it stay proactive in cash flow management and planning. With a record of monthly statuses, businesses can more easily identify discrepancies in their accounts and address any issues more quickly.

If this is the case, make sure you write down your purchases and organize receipts. That way, you can keep your accounts payable in tip-top shape for your monthly close. While there’s a certain level of predictability in expenses and transactional activity, each month may come with new wrinkles to account for. Gain global visibility and insight into accounting processes while reducing risk, increasing productivity, and ensuring accuracy. Close the gaps left in critical finance and accounting processes with minimal IT support. The team must manually upload data to the accounting system for the accounting department to process month-end goals.

What you’ll find in our Month-end Close Checklist Template

However, this frequently doesn’t happen due to a lack of reconciling items. A period-end process refers to the end of every accounting period, monthly or annual, when a business generates financial reports to help analyze its financial health. For this to happen, it must organize and perform account reconciliations for the period.

• Sticking to the same schedule for releasing financial statements every month can help you better organize your team’s time and activities.
• Having a checklist for the month-end close can help to ensure that nothing is missed and that all the key steps have been checked.
• One of those transactions is the depreciation expense, which helps you recover the cost of the item over its life.
• This process allows you to confirm the balances in the balance sheet line items, which are the assets and liabilities plus the owner’s equity accounts.
• The first step in the month-end closing process is to collect all the relevant financial information.

Make sure your records for the month are accurate by performing a bank statement reconciliation. When you’re finished with the month-end closing and you have time to take a few deep breaths, consider reviewing your closing processes to look for opportunities to automate and streamline them. These communications should include brief reminders as to exactly what needs to be done and a due date for completion. For example, it can be helpful to set parameters pertaining to employee reimbursements, wherein employees must submit expense reports by the last day of the month.

You want to close out a month so that you have a solid record of what happened during that month, with no chance of numbers moving around or shifting after the fact. We’re offering a free month-end closing template to help you and your team get the job done efficiently, every time. Very often, those types of purchases are erroneously posted to expense accounts when you process invoices, so you need to reclassify them to the fixed assets account in GL. This is a good time to review purchases for such exceptions and handle them proactively. By sending these important reminders in advance, you can ensure greater accuracy in your month-end reports and limit the time spent managing exceptions at the end of each accounting period.

The month-end closing process should typically follow the same standardized steps and approval workflows to ensure consistent results. Since it’s a routine activity, organizations will most likely encounter the same roadblocks repeatedly. If these problems are noted down by the responsible employees, they can be addressed and fixed in time.

Reviewing statements can help you catch issues early on, like overspending, and prevent problems later on with your books. For example, maybe you have a miniscule amount of work related to PMs because you haven’t talked to your customers about it. It’s a potential revenue stream you simply haven’t taken advantage of yet.

However, here’s an ideal flowchart that can be followed for a month-end close process depending on the roles, deadlines, and processes. Also, by recording monthly deposits of customer payments, you will be better able to reconcile your business’ bank statements at the end of the month, as well as at year-end. The month-end close process is a necessary, routine practice that includes reviewing financial information from the last month and ends with issuing financial statements. After the month is closed, no changes can be made to the month’s numbers.

Often, it takes a big change like an acquisition or turnover to take stock of all the tasks that are being performed and who is responsible for them. And beginning that process in the midst of a year-end or transformation project can be especially challenging. Our API-first development strategy gives you the keys to integrate your finance tech stack – from one ERP to one hundred – and create seamless data flows in and out of BlackLine.