Join us for episode #141 where we discuss the Accounting Month-End Close Checklist. Jamie Staley discusses different techniques and strategies for handling this for various businesses. This analysis is essential in keeping accurate data and making sound financial decisions based on your business’ monthly data.
What we cover in this episode:
- 01:45 – Why is the Month-End Close Important?
- 04:30 – Demystifying the Month-End Close
- 14:20 – Crafting the Month-End Accounting Checklist
- 18:55 – Implementing Best Practices
- 24:00 – Avoiding Potential Pitfalls
Why is the Month End-Close Important?
If you still need to add a month-end close to your business monthly to-do list, don’t panic. However, it would help if you considered it because businesses of any size can benefit from this process. Additionally, closing out your books at the end of the month versus the end of a year makes life much easier.
The importance comes down to accounting for all of your business transactions. Documenting and organizing these financial records ensures that when you check them, you can trust that they are accurate. This helps you make smart choices based on your financial data.
Demystifying the Month-End Close
The month-end close is an essential part of owning a business. Your accounting team usually completes it with precise steps. One of the most important steps is to classify your transactions.
Classifications include revenue, expenses, balance sheets, etc. Using a financial system such as QuickBooks online can help streamline this process and make things run smoother and faster.
Bank and Credit card reconciliation are next and an important part of the process. Some owners may believe that only these two accounts require verification. However, verifying that all accounts have been reconciled is crucial. Make sure to include the systems you use in the reconciliation process. Also, include fixed assets and different types of accrual entries.
Balance sheets are also crucial to the month-end close. Checking these monthly is an excellent way to stay up-to-date with your balances owed. You should be able to retrieve a loan balance and not question or be surprised by any numbers. Including balance sheets in your monthly process is important for accurate profit and loss statements.
After you feel comfortable with your balance sheet, you can review your profit and loss statement. This step ensures that all the data looks accurate and that you don’t have any questions about changes from month to month. Once you review this statement, you can officially close the books, and you do not need to make any changes.
Crafting the Month-End Accounting Checklist
If you are just starting your journey into the month-end close or want to double-check that you have all of the elements needed for it, the best place to start is to create a month-end close checklist. You can make this in whatever program you are comfortable with.
Start your checklist with all the tasks that need completion. Include who is responsible for each task. If relevant, include deadlines. Next, create a section detailing how each task is completed. For example, using QuickBooks for reconciliation and saving documents for balances due.
It is important to remember that crafting this throughout the month is most beneficial. You can record most things, such as transactions and payroll, during the month. This will help the books be more accurate and manageable.
Implementing Best Practices
Remember to include not just the basics but also anything specific to your industry in your checklist. Construction, for instance, must consist of a monthly work-in-progress report, so always add specific items if needed.
Another thing to consider would be leveraging technology and automation to make life easier. You can begin your checklist in Excel and manually complete it.
Start by using Excel to create your checklist and fill it out by hand. Once you feel more at ease with the month-end close process, consider transitioning to an automated system. This system can assist in managing the checklist effectively.
Google Sheets, Karbon, and Trello are just a few systems that allow you to create and manage checklists alongside your team. These types of systems offer checklists that notify team members when a task is complete and when it’s time for someone else to begin their work. This can be set up automatically.
These systems also allow you to see which tasks are completed on time and which ones need more attention. This way, the person in charge can make sure they meet their deadlines.
Documentation is also an essential aspect of the month-end close. If the person who usually handles your account reconciliations is unavailable, it’s important to have a backup plan in place. Make sure there is someone else who can fill in and meet deadlines, or have an employee ready to be trained. Be sure to have the necessary training materials saved in your files.
Having documentation for all processes is a great best practice because it ensures that tasks will continue to get done regardless of bumps in the road. Several tools, such as Trainual, can assist you in the documentation process. So, take some of the pressure off and use technology to its full potential. Training videos and FAQs are highly beneficial in this process.
Avoiding Potential Pitfalls
Timing is such a crucial factor in the month-end closing. Meeting your deadlines ensures that others will meet their deadlines, allowing you to record data and move on to the next steps. Waiting too long to complete tasks or record data can create issues within the current month and next month’s planning.
Also, understand when data is realistically retrievable. You may get data on a different date than you would like, but note when that data is available to record it and check that task off your list.
The most important thing to remember is that things happen. Things go wrong. Technology doesn’t always do its job. This is okay and can be remedied.
Keep moving forward on processes you can tackle until other data is available. Always communicate any delays with supervisors so everyone is on the same page.
Including instructional documents or videos can improve the process tremendously. Offering these can also free leadership up by not having to set time aside to train.
Training can be for people stepping into a role or onboarding new employees. The lessons are ready and available. Setting your team up for success is the best way to ensure a successful business.
Conclusion
Creating this accounting month-end checklist and closing the books will benefit your business in many ways. Organizing your business finances reduces stress and allows you to concentrate on other aspects of your company. Keeping track of your financial records is important to maintain order. This will help you manage your time more effectively.
By staying on top of your finances, you can free up mental space for other tasks. You can also use it to compare revenue and spending month to month and track any changes. Make sure to assign the month-end close tasks to someone who is familiar with the numbers. Having a reliable finance team can make a difference in the longevity and success of your business.