Whether you’re a small business owner, a CPA, or part of a dedicated corporate accounting team, the success of your business relies heavily upon certain standardized procedures and the data they generate. This is particularly true for the accounts department, where the month-end closing process must be done properly to ensure the accuracy and completeness of your financial statements and balance sheet. 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.
Traditionally, month-end closing has been regarded as a time-consuming and occasionally frustrating process—a sort of “necessary evil” in bookkeeping. But by taking the time to understand its particulars, implementing a clear and concise checklist, and investing in the right resources, you can ensure your month-end close is quick and (nearly) painless, without sacrificing accuracy or completeness.
The month-end closing process
It is crucial to have a month-end closing process checklist since you need to aggregate data from multiple places to create and review the financial statements. Here are some records that you need to double-check:
1. Cash: Ensure that your cash balance matches the bank statements, and check if there are any discrepancies or undeposited funds.
2. Reconcile accounts: Reconcile every transaction with your bank account statements.
Break your account into the following categories:
· Cash, cheques, and saving accounts
· Prepaid or accrued account
· Bank loans and notes
Pick one option first. Start working on it carefully. Make strides for others afterward. This way, your business accounting will stay streamlined and you’ll be able to catch errors at month-end closing with ease.
3. Check revenue and expense accounts: Review your revenue and expense accounts. Make certain you recorded them in the correct account for a specific period. Be sure accruals and prepaid expenses are recorded in your books in the right manner.
4. Accounts receivable: Check the status of due payments and whether you have to write off any bad debt.
5. Accounts payable: Cross-confirm the payments that you made to suppliers during the month.
6. Inventory and fixed assets: Document the depreciation value of fixed assets and track your inventory.
7. Accrued taxes: Check for the accumulated tax for the period concerned.
8. Payroll: Calculate employee payroll for reimbursement.
9. Review your work: Have a second set of eyes review your work before completely closing business accounts at month-end. After reviewing your work by yourself, ask your manager or supervisor to have a look at your books.
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