What is the end of the month? Steps, process, checklist and best practices - Vena (2023)

What does your month end mean?financial closeprocess looks like? Do you have a system, or do you "wing it" and hoping for the best? Looking for a better way to get things done over the next month?

Never underestimate the importance of the month-end close and the importance of a month-end close checklist. Keeping track of what happened the previous month can position your business for future success.

Monthly closing ensures you have information about the financial health of your business and are ready to report those numbers. It's critical when making short-term decisions and helps your teams work toward your organization's long-term goals.

In addition, accurate monthly reportsmakes the year-end closing much easierunderstand.

The month-end close process is vital for any business, but it can be very time-consuming. Creating the right month-end close checklist allows your team to break down reporting silos and focus on more strategic business areas.

💡Main conclusions:

• Your month-end closing process should include registering incoming cash, reviewing your AR records, and reconciling all accounts, including petty cash.
• Track all your business transactions, keep accurate records and reduce the risk of fraud. Stay informed about the financial health of your organization.
• Your month-end checklist should include categories, task descriptions, task prioritization, names of preparers and auditors, and provide a thorough review of the financial statements.
• The benefits of a month-end checklist are fewer errors, better reporting results, increased efficiency, and preparing your organization for audit readiness.
• Common mistakes companies make during month-end close are duplicate data entry, non-standard processes, information delays, and a lack of automation.

How does the monthly closing work?

At the end of the month, your finance and accounting teams collect, review, and reconcile the previous month's financial transactions and activities.

It provides compliance and financial accuracy while maintaining the integrity of your data forAnalysis planning. Spending and business activity are somewhat predictable, but each month can present new issues for you and your teams to consider.

For this reason, we emphasize a solid flow at the end of each month, from the start of the team's intelligence gathering to crossing the finish line with the final financial report.

This month-end checklist not only outlines the transactions but also the growth of the business in each period. Remember that every basic task has many sub-steps. In addition, deadlines depend on the specific situation of your company.

This process includes multiple steps that your team will complete over the course of several days.

What are the key steps in the month-end closing process?

1. Preparatory work

Provision of email on unpaid invoices. Contact your sales rep to ensure no lost revenue and sales pipeline metrics are correct.Make sure all manual entries are correct(But don't bother checking the automatic posts at this early stage.)

2. Match the money

Check and reconcile money. When money is on the way, look at its destination and relationships. We recommend reviewing all payment accounts to ensure everything is organized (including petty cash) and grouped correctly.
Check account transactions: Double check and adjust accounts payable (AP) and accounts receivable (AR).

3. Accumulation Estimates

Review all end-of-month regulations and track coverage for the next month. Accounts for prepayments such as earnings.

4. Preliminary Revisions and ASC 606

Review all manual and automated data streams related to revenue recognition and commissions. Test validity and conduct preliminary walkthroughs with your team to ensure information makes sense and is consistent across reports.

5. Carry out flow analysis and adjust

We refer to this as “making your finances more flexible”. Review and review the month-end monthly and quarterly results to see how the report compares to the company's growth goals and expectations. If something feels unusual and needs adjustment, it can grow over the years. ‍

6. Pack and deliver

Treat these reports as if they are already due for release. Double-check your reports, then hand them off to executive teams for review and analysis.

Why is the monthly statement important?

Monthly Close enables your teams to keep track of all your monthly business transactions. It is important to ensure that your accounting information is as accurate and complete as possible.

Accurate monthly data feeds into many other accounting processes. For example, an accurate monthly report makes it much easier to close the year.

Month-end closing benefits include:

• Prepare accurate and up-to-date financial records.
• Organize financial statements and save time filling out tax returns.
• Month-end reports streamline the process and make auditing easier.
• The financial close process identifies areas that need improvement.

You can also make more informed decisions based on your company's financial activities. He is positioning his leadership team to do thismoney allocationsfrom which all departments of the company benefit.

The ultimate checklist at the end of the month:

1. Register the money received

The money received comes in various forms such as bill payments, prescriptions and loans. Make a note of any funds your business received during the month. This is also a good time to do the following:

• Check pending deposits
• Make sure all invoices have been sent
• Count money in hand

Manually recording cash received and completing these other steps can be time consuming and stressful. It's better to use oneSoftware application that automates these tasks. This makes the monthly closing more efficient and accurate.

2. Check accounts payable

• Gathering all necessary records
• Determine if there are any liabilities that have been paid
• Review your accounts payable records to see what has been resolved and what has not

It's easy to postpone this step until the end of the month, but it's also a costly mistake. Automation software can help you better track your liabilities throughout the month, so you can take less pressure when your tax calendar changes.

3. Reconcile accounts

• Bank accounts (checking and savings accounts)
• Bank loan or lease (e.g. for equipment or real estate)
• Accumulated or prepaid invoices

It's usually best to start with bank accounts, but it's more important to implement a reconciliation system that works for you.

Note: If you don't reconcile the accounts, a simple mistake this month can become a bigger problem the next month.

4. Check fixed assets

5. Review all financial reports

This may be the last thing you do, but it still requires your attention. Start by reviewing these financial statements:

• General Constability
• result report
• balance sheet
• proof of income
• cash flow statement

4 benefits of a month-end checklist

Understanding why month-end close processes are critical to the business is the first step in creating a checklist. Before we discuss the most common mistakes people make when trying to close the month, let's look at the benefits of a month-end close checklist.

1. Reduces accounting errors

Accounting reports contain a large amount of data and are prone to double-entry, omissions, and other errors. These errors can be legitimate oran attempt to cover up fraud or theft. A month-end checklist helps accountants remember what to skip.

2. Improves accurate report results

Accurate reporting allows senior management to identify and troubleshoot performance issues. In addition, creditors, investors and analysts can assess the company's overall performance and financial condition.

By implementing the checklist, the accounting department can produce accurate financial statements that all interested parties can trust. A checklist at the end of the monthhelps eliminate errors and omissionsand helps ensure critical balances like cash and inventory are accurate each month.

3. Increases the efficiency of your teams

Generating reports takes a long time due to large amounts of data. However, delays in the release of financial statements can cause management to become aware of significant performance and liquidity issues that need to be resolved sooner.

Month-end checklists reduce the time spent organizing and submitting internal financial reports. A well-designed to-do list keeps accountants and management on the same page when it comes to getting financial reports.

4. Prepare your company for an audit

In addition to the audit readiness of your company at the end of the month, a checklist will also help you with the preparation of your annual financial statements. Implementing a month-end checklist increases efficiency and accuracy, and reduces the time, effort, and expense of preparing for year-end audits.

Common month-end closing mistakes - and how to avoid them

1. Duplicate data entry

One of the challenges we face when completing month-end closing tasks is that entering data manually is time-consuming. While you may have multiple systems to help you run your business, they tend to run independently.

Employees must manually upload data to the accounting system for theAccounting to process end-of-month goals. Unfortunately, this process is time-consuming and error-prone, so finding an automated solution is imperative.

Even after entering the data into the system, your accounting team still needs to ensure that the information is correct across all platforms. Ultimately, this manual process exhausts resources.

When teams manually enter data into the system, there is a high risk of error. Finding a system that can automatically transfer data from one system to another is a great way to streamline the month-end close process. Even small mistakes in the annual financial statements can lead to big problems when the information flows into the planning.

Even if there is an error in the data, using the manual process will take a lot of time and effort to find and fix the cause. This required time delays the release of the monthly financial statements as your accounting team has to spend time reviewing completed work.

2. Non-standard processes

A month-end close process should generally involve the same steps each month. However, the manual integration of data from different departments can present new challenges every time. Standardizing processes guarantees accurate and consistent results month after month.

Standardized processes help you meet your month-end close goals, even if your accounting team is understaffed. On the other hand without asystematic way of balancing accountsyou can encourage employees to look for shortcuts to their tasks.

These workarounds increase the likelihood of errors in your financial data, which can lead to problems later and take hours to document a repeatable procedure each month. Create checklists of tasks and activities sorted by date.

Simplify your chart of accounts. Also check the journal entries to see if you have considered materiality (materiality). If possible, increase the dollar limit on specific transactions to avoid unnecessary writes.

3. Past Due Financial Data

Another challenge you may face is the speed of generating monthly financial reports. In other words, how much time does your accounting department need to prepare the statements after the end of the month?

If the process is taking too long, you need a way to improve the efficiency of the month-end closing process. Not having access to information when you need it makes it difficult to make decisions and plan for the future.

Running a business without readily available financial statements is challenging. Without the right tools, your company's processes become less effective and you lose track.

Find out why data from a specific source is often delayed. Other departments and providers may not understand the need for timely information.

Employees may need specific types of training or refresher training. Another option is to reconcile important accounts more frequently. This reduces your dependency on last-minute external accounting documentation.

4. Understaffed accounting teams

While you may not have the resources to hire more staff, training a few employees on the critical steps in the closing process could be a viable option. As long as an experienced financial professional or manager takes responsibility for the month-end closing, this alternative can work for your business.

You must also assess fraud concerns. Cross-training of employees can also allow for segregation of duties and improve a company's internal control environment.

5. Lack of automation

Automation is important in today's business world. Don't rely on spreadsheets and manual processes that don't allow for timely reviews and corrections in your accounting system. Identify tech-savvy employees who can research executive needs andcurrent software reporting capabilities. Get advice from a cloud consultant or coach on your current processes and the potential for incremental automation.

Is that all you have to do?

The steps in our guide to the best month-end close are a good start for any month-end process checklist, but more steps can be added. Consider the following:

• Check the income and expense accounts
• count stock
• Check the little box

The more times you go through the month-end closing process, the better you understand what steps to take and how you can work more efficiently in the future.

Diploma

Are you confident that you can master these five steps? Do you think they will improve your month-end closing process?

Once you have created a month-end closing checklist in Excel, you can use oursFinancial Close Management Softwareto automate tasks to save time, reduce stress and maintain accuracy.