Month-end close process flowchart is recommended for every business to guarantee comprehensive and accurate record tracking. It has a lot of benefits for a company in both the short term and long term. 

This article provides a thorough guide with crucial information one needs to start the process. 

Month-End Close - A procedure all companies need to perform.

What Is The Month-End Close Process? 

The month-end close process is an accounting procedure where a business collects all the accounting information of the month and reconciles its transactions during the current period. It has to review this information to ensure all the data is accurate, complete, and in order. 

The business benefit a lot from such standard operating procedures:

  • Ensure accuracy, comprehensiveness, and reliability for financial data of the current month. 
  • Enhance the decision-making process for the business owner. 
  • Provide strategic insights into the business's financial health through financial statement documents like balance sheets.
  • Support financial reporting and audit.
  • Enable easier tax filing.

While the most important closing period does not come until the end of the fiscal year, performing good tracking every month, every week, and every day only does wonders for businesses.

Month-end close process is about knowing where and when your money goes.

Month-End Close Process Checklist

Collect Data

The first thing to do on the monthly closing process checklist is record all information on invoice payments, revenue, loans, etc. As long as it is cash coming in, it has to be recorded. Also, check if all the invoices have been sent and paid. 

Apart from incoming cash data, there is other information that needs collecting, including inventory count, accrued expenses, and general ledger. 

All of this data should be derived from daily financial records that have already been made by month-end. 

Review Accounts Payable Records

This part means checking and ensuring the business's accounts payable balance is in line with the general ledger. 

To do this, business leaders need to note down all the purchases, place the receipts in corresponding order, and cross-check records to confirm that they have been paid. 

Reconcile All Accounts

As the main step, reconciliation is when the business matches the entries in its financial statements with those from other parties such as vendors and banks. 

Accounts payable and accounts receivable are divided into three main categories: prepaid/accrued accounts, bank loans/notes, and cash, checks, and savings accounts. 

Do Not Forget Petty Cash

Petty cash includes monthly expenses that are too insignificant to make disbursements by cheque. Petty cash is usually spent on small items such as stationery, flowers, etc.

Despite being very minor, these expenditures must be recorded and tracked like any other account. They can affect the entire organization if not monitored closely.

Review Fixed Assets

Fixed assets are tangible or intangible assets purchased for long-term value with long lifespans. Examples of fixed assets cover buildings, computers, furniture, machinery, land, etc. 

The reason why reviewing fixed assets is involved is that these items can generate expenses in the form of repairs, depreciation, amortization, or impairment costs. Such expenses need to be recorded for the sake of month-end closing. 

Perform an Inventory Count

A company with physical inventory has to compare and contrast to detect any difference between the actual count and the book at the end of the month. In case of discrepancies in inventory levels, they will acknowledge the situation and find out the causes. 

Plan Ahead

By conducting an efficient month-end close, a company opens up opportunities for itself to refine and streamline its business process to enhance efficacy. 

Being well aware of the current state also enables the company to develop a better business plan for the next month or next period to achieve its goals. The company can also avoid risks in the future when acknowledging the business health in time. 

Month-End Close Process Flowchart - Best Practices

An extended flowchart of the month-end close process
  • Accuracy Outweighs Speeds: As a reviewing, checking process, being accurate is always better than being fast. As a rule of thumb, spending about ten business days on the procedure is a reasonable term to follow. Remember that a fast process providing false information does no good for business. 
  • Time Management Is Important: Speed is not the top priority, and efficiency needs to be maintained. That is why time management plays an important role in keeping work going in accordance with the time frame. 
  • Mistakes Make Valuable Lessons: A review is done every month, giving the company a new chance to learn from its mistakes in the previous month and do better in the next period. 
  • Coordinates With Other Teams: Members outside the accounting department can help with the month-end close process by providing important data relating to their activities. Such statistics can be used for cross-checking and re-checking to verify records at the end of the month. 
  • Automation Software Is Innovation: These days, almost every company relies on technology for fast, accurate, comprehensive records. Utilizing accounting software and supporting tools will not only speed up the process but also ensure precision better than hand-written records.