Month End Closing Checklist Quick Guide

Hey there! This quick guide is about a topic that is absolutely crucial for keeping your business on the straight and narrow: the month-end closing process for accounting teams. Whether you’re a startup, a small business owner, or part of an accounting squadron in a bigger enterprise, mastering the month-end close can transform a dreaded chore into a streamlined, insightful routine. So, let’s unpack what it is, the steps involved, and offer you a handy month end closing checklist to keep your finances in great shape.

GrowthLead month end closing checklist

Table of Contents

What is Month End Closing?

In the simplest terms, month-end closing is the accounting process of reviewing, adjusting, and finalising all financial transactions of a business for a particular month. Think of it as your financial month in review, ensuring every penny spent or earned is accounted for and neatly tied up with a bow.

Why Month-End Reporting Matters

This ritual isn’t just about keeping your books tidy (although that’s a big part of it). It’s about gaining insights into your business’s financial health, making informed decisions, and ensuring compliance with accounting standards and regulations. Plus, it’s your first line of defence against errors, fraud, or financial discrepancies.

The Month End Closing Steps

Let’s break down the month-end closing into manageable chunks. While each business might have its nuances, the following steps are generally a good blueprint to start with:

  1. Reconcile Your Accounts: Ensure all bank accounts, credit cards, and petty cash align with your ledger entries. Discrepancies here can lead to major headaches down the line.
  2. Review Accounts Receivable and Payable: Chase up those outstanding invoices and ensure all bills are paid. It’s about knowing exactly where you stand with cash flow.
  3. Inventory Management: If your business holds stock, conduct an inventory check to reconcile physical stock with your records. Adjust for any discrepancies.
  4. Prepaid Expenses and Accruals: Account for expenses paid in advance and accrue expenses not yet billed. This keeps your financial statements accurate and reflective of the actual financial position.
  5. Depreciation: Apply depreciation to fixed assets to account for their wear and tear over time, affecting your financial statements’ accuracy and tax liabilities.
  6. Review Financial Statements: Once all adjustments are made, review your financial statements – the balance sheet, income statement, and cash flow statement. Look for anomalies or unexpected variances.
  7. Close Your Books: Finally, lock down the month’s accounts to prevent any retrospective changes that could disrupt your financial narrative.

Your Month End Closing Checklist

To keep things on track, here’s a checklist encapsulating all activities you need to tackle:

  • Reconcile all bank and credit card accounts ☑️
  • Review and follow up on outstanding accounts receivable ☑️
  • Verify and settle all accounts payable ☑️
  • Conduct inventory count and reconcile discrepancies ☑️
  • Record prepaid expenses and accruals ☑️
  • Calculate and record asset depreciation ☑️
  • Review trial balance for posting errors ☑️
  • Prepare and analyse financial statements ☑️
  • Investigate and correct any financial discrepancies ☑️
  • Close the books for the month ☑️

Tips for a Smooth Month End Closing Process

  1. Keep It Routine: Consistency is key. Establish a regular schedule and stick to it to avoid last-minute scrambles.
  2. Leverage Technology: Use accounting software to automate as much of the process as possible. It’s a game-changer for accuracy and efficiency.
  3. Communicate Clearly: Ensure everyone involved knows their roles, deadlines, and how their work impacts the month-end close.
  4. Continuous Improvement: After each month-end close, review the process. What went well? What didn’t? Adjust and refine your approach accordingly.
  5. Documentation: Keep detailed records of all adjustments and decisions made during the month-end close. This transparency can be invaluable for audits or financial reviews.

Final Thoughts

Month-end closing need not be a source of dread for accounting teams. With a clear understanding of the process, a structured checklist, and some savvy tips, you can turn it into a streamlined, insightful exercise that significantly benefits your business. So, embrace the routine, harness the power of technology, and keep your financial health in check. Your future self will thank you!

👉 Learn more about How to do Accounting for Small Business Owners here.

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