Month-End Close Process: Steps, Checklist & Best Practices

It is crucial to have a checklist, as you need to aggregate data from multiple places to create and review the financial statements. After collecting all the data, it needs to be cross-checked with receipts, bank statements, and other sources of information that the business might have. All accounts on the balance sheet, like cash, savings, and checking, must be reconciled. A thorough month-end close process helps identify and correct errors promptly, reducing the risk of inaccuracies in financial statements and maintaining compliance.

Review accounts payable and accounts receivable

• It also helps reduce errors and simplifies the sharing of financial statements.
• Implement a robust review process to catch mistakes before they make it into your final reports.
• It involves reviewing, reconciling, and finalizing all financial transactions for the period.
• Its Cash Management module automates bank integration, global visibility, cash positioning, target balances, and reconciliation—streamlining end-to-end treasury operations.
• As you grow, hire a small accounting team to help you with the accounting procedures and financial reporting.

This way, you can focus on your business, knowing your financial matters are in good hands. They can analyze your numbers and give you insights to make good business decisions. If you have accounting software, you can generate these reports easily and avoid a ton of manual work. Reconciling accrued expenses will help month end close process you stay on top of all invoice payments and dues within a year.

Prepare a bank reconciliation to reconcile your bank account with your financial records. Bank reconciliations will also help you understand your cash situation and not overdraw your account. Small businesses often struggle to collect money on time, resulting in poor cash flow management and bad debt. Our intuitive software automates the busywork with powerful tools and features designed to help you simplify your financial management and make informed business decisions. Businesses should also consider investing in automation solutions that support data aggregation and segmentation.

Someone independent of transaction processing should handle each reconciliation. This separation maintains proper internal controls and provides an extra set of eyes on the numbers. This guide gives you a complete month-end close checklist and proven strategies to streamline your process. You’ll see how to reduce closing time from weeks to days while maintaining the precision your organization needs. Depending on the size and complexity of an operation, it can take anywhere from several days to several weeks to complete. But every finance team knows it’s the backbone of accurate, trustworthy reporting.

Learn & Transform

• But not analyzing your financials and taking corrective action can be catastrophic for a small business.
• A primary step in preparing for the close is performing bank and credit card reconciliations.
• Accounting automation drives efficiency by slashing tedious manual entry.
• More importantly, staying on top of your financial data will help you achieve your long-term business goals.

Ensure all transactions on bank and credit card statements align with the general ledger. Month-end close requires input from HR, payroll, procurement, and other teams. When there’s misalignment or poor communication, finance teams often lack the data they need on time. That’s why having a well-structured month-end close checklist is essential. In this guide, we’ll walk through the close process, identify common mistakes, and share best practices to streamline your month-end close process. This is not an offer to, or implied offer, or a solicitation to, buy or sell any securities.

Who Should Prepare a Bank Reconciliation?

Or, you might see that a particular product line is becoming more profitable, suggesting an opportunity for increased investment. This involves comparing current results to previous periods and budgets, calculating key financial ratios, and identifying significant patterns. Double-check that revenue has been recognized in the correct period and that all your expenses are properly categorized.

AP Automation

All fixed assets a business might have, like equipment, technology, storage, housing, vehicles, etc., must be assessed. It is also essential to account for asset depreciation; the depreciation amount must be categorized under expenses. Proper financial closure helps track and manage cash flow effectively, ensuring the business has sufficient liquidity to meet its obligations and invest in opportunities. Start putting these procedures in place gradually, focusing on areas where your current process faces the greatest challenges or delays.

The results of the month-end close process are then communicated to stakeholders, and the budget and forecast are updated as needed. Adjusting entries without clear documentation makes it hard to track changes, especially during audits. Accounting software for midsized businesses needs powerful features and easy usability.

Agentic AI: The Next Frontier in Financial Automation

A well-executed month-end close process is the foundation of accurate financial reporting and informed decision-making. By following a comprehensive close checklist, you can transform a stressful process into a smooth, efficient operation that adds real value to your business. According to one study, accounting errors are up 30% since 2019, due in part to a growing accountant shortage. That’s why a thorough review process is essential in the month-end close.

Now, let’s dive into the seven steps that will help you achieve a smoother, more accurate monthly close process. Accruals represent revenues earned but not yet received, or expenses incurred but not yet paid. Accrued salaries for employees working at month-end require an adjusting entry to recognize the expense. Similarly, earned interest income not yet received is recorded in the period it was earned. As you grow, hire a small accounting team to help you with the accounting procedures and financial reporting.

Generate updated versions of all financial statements, including the income statement, balance sheet, and cash flow report. Verify all figures and ensure financial reports are ready for leadership review. By minimizing manual data entry and automatically applying accounting rules, automation is one of the top ways to reduce errors in your financial statements.

Revenue Recognition

A well-executed monthly close process provides a clear snapshot of your company’s financial health, enabling leadership to make informed decisions based on up-to-date data. It also helps catch and correct errors before they compound, ensuring the integrity of your financial reporting. In this article, we’ll walk you through seven steps to cut down on manual processes and ensure accurate financial statements for a smoother closing process.