The End Close is a series of review and reconciliation tasks that accountants do to update a company’s financial information for the accounting period, which could be a month, quarter, or year. This keeps your client’s financial transactions of the previous month, quarter, or year from mixing up with those of the next month, quarter, or year.
Back in the day when accounting was done on columnar pages, closing the books meant literally closing the book so that more financial transactions cannot be added without your knowledge.
Today, closing the books means recording all expenses and revenues to get a complete and accurate financial record on the company’s accounting software.
Achieving this on a consistent basis depends on the procedure your team has to work with. That is why the month end close process is such a huge deal.
The month-end close process is the act of reviewing, recording, and reconciling the monthly transactions of businesses to get up-to-date financial information that helps them make informed decisions, issue accurate financial statements, and comply with government regulations.
The process involves checking receipts, invoices, and other documents to match the client’s income and expenses to their physical records.
Download Month Close Process Template for Free
In theory, the month end close process is straightforward. But in practice, getting from one stage to another is difficult, especially for clients with large businesses and a distributed workforce.
A standard operating procedure (SOP) will help you stay on top of the process by addressing common challenges like
Your client’s financial data might reside in different places—like bank statements, accounting software, enterprise resource planning (ERP) software and spreadsheets.
An effective month-end close process includes a system that collects and organizes data without delay or risk to data accuracy.
Your team members might be clear on what they need to do (internally), but when you have to collaborate with the client’s team, you also need a process what defines what (documents, access to third-party apps) you need from them, when, and how they should do it.
Usually, the client task feature of your work management solution should help you create a list of tasks for your client so your team doesn’t waste valuable time chasing them.
Internally, the task dependency feature in your workflow tool should enable your team members to hand work off to each other without confusion or delay.
Most Month End Close tasks are manual, repetitive tasks that software solutions do better than humans.
Your month-end process should include ways to automate as many tasks as possible to free your team to focus on the tasks they do best. This keeps your month-end close projects from error and, potentially, missing deadlines.
Having a month-end close process in place ensures that your numbers are accurate and reliable.
Business owners need the month-end close to manage their cash flow, reduce the risk of fraud and make informed decisions to grow their firm while accounting and bookkeeping firms need a month-end close process to
Having a process that streamlines your month-end process improves your team’s ability to work with confidence.
They know what needs to be done and when, so they wouldn’t be confused trying to guess the procedure for doing the work that falls to them.
An accurate month end close process gives clients the financial information to make necessary improvements to their business.
Such clients will want to keep you around for a longer time.
If you also provide tax services to your month end close client, accurate monthly records makes it easier (and faster) for your team to complete their tax returns.
Accurate month ends make completing the year-end quicker and more accurate, thanks to an effective month end process.
The goal of the month end process is one: to make your client’s financial records up-to-date. But each business, each accounting (and bookkeeping) firm decides the list of tasks to check off on their way to achieving this goal.
Here’s a straightforward way to complete your client’s month end close process:
This is where you receive the client’s financial information (receipts, accounts payable, accounts receivable, etc.) from their data management systems, such as enterprise resources planning (ERP) software, accounting software, and bank statements.
This step helps you to record transactions like prepaid expenses, deferred payments, depreciation, and accrued revenues and expenses.
At the end of this step, you will have reconciled the difference in the time of payment or expense for all goods or services by their actual delivery in the general ledger.
Bear in mind that this only applies to businesses that use the accrual method of accounting.
TIP: Using an accounting software solution to reconcile reversing and recurring entries will make this step much easier (and improve the accuracy of the information in your financial statements).
Compare the transactions in credit cards statements to your client’s general ledger to resolve:
To resolve any difference in the figures on your client’s general ledger and the statement from the lender and or amortization schedule by
Alternatively, take advantage of a software solution that pulls and harmonizes data between your client’s accounting software and the lender.
To prove whether the stated assets and liabilities
The goal is to show that the value of the assets and liabilities is true as they appear in your client’s balance sheet.
To categorize transactions that have been recorded in suspense holding account because of missing or incorrect details, like
To analyze the difference between the business’s total liabilities and assets by subtracting the client’s liabilities from their assets.
This helps to verify the financial ownership of the business.
To categorize transactions that your client was previously not sure about how to classify them when recording them.
To match the difference between the client’s opening and closing balance with the corresponding transaction details.
This is where you prepare the client’s financial statement (balance sheet, income statement, and cash flow statement) with the information you have collected, verified, and reconciled.
By ending the financial transactions for the month. All revenue and expense accounts must equal zero and the total debit balance must equal the total credit balance.
Let the client know that their work is ready. They can review the month-end process for possible mistakes in the monthly financial statements.
Download Month Close Process Template for Free
Few accounting procedures need standardizing than the month end close process. The procedure is manual, repetitive, and complicated, which makes defining the steps that go into completing it crucial for your team.
An accounting workflow template saves your team the confusion, errors, and last-minute rush that most accounting and bookkeeping firms struggle with.
When everyone in your firm works with a template that shows them what they need to do at every step, your firm’s month-end projects will consistently satisfy your clients.
But creating one might take the time you would have used for other high-value tasks.
Seeing that speed and accuracy are the most critical skills in the month end close process, we have created a free month end close template to streamline your team’s month-end projects.
Download and modify it to your taste to make your month end process smoother, faster, and more consistent.