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As your business grows, so does the complexity of your financial processes—particularly regarding month-end closing. This article is tailored for growing businesses finding it challenging to close their books efficiently, impacting timely business decisions. With the proper month-end closing best practices, you can achieve a smoother, more efficient financial closing process. Here, you’ll find the practical advice you’re looking for related to timely reconciliation, accruals management, and comprehensive reporting. This is how to find that financial transparency, timeliness, and accuracy you seek.

What Is the Month-End Close?

Your month-end closing process includes collecting, compiling, reviewing, and reconciling the financial activities that happened in the previous month. This enhances your accounting accuracy because recent transactions are fresh on the mind. It improves your ability to adapt to changing trends and predict future shifts using financial data.

Your accounting team may spot new challenges and opportunities to consider and plan for each month. At DHJJ, our CPA firm specializes in streamlining these processes to ensure your financial reporting is accurate and timely, freeing you to focus on core business activities.

Best Practices for Month-End Close

Best practices will fall into five distinct categories, each as important as the next when developing a smooth, accurate, and accountable closing process. Creating a checklist for month-end closing that includes tasks in these five categories is essential so the responsible person can check each box to ensure monthly duties occur.

1. Timely Reconciliation of Accounts

Check your account balances and any cash in transit to reconcile your balances. This is the ideal time to recheck those payment accounts to ensure everything is appropriately allocated. This includes petty cash.

This is also the time to ensure any manual entries are correct, identify those that aren’t, and, if needed, determine how that mistake, commission, or error happened. You can then improve any processes that may have made it possible.

Could that process have been automated, eliminating the need for manual entries? Just think about how that would save you time during your month-end processes. That said, automation isn’t flawless. You should also check any automatic posts from your accounts to ensure they’re accurate.

Given the monster of a project, this can become a consideration for consolidating transactions and reducing the number of accounts you must reconcile during this phase of a month-end closing. When multiple accounts are needed, explore using accounting software to visually consolidate your accounts so you can review transactions in one place. Partnering with a CPA firm can leverage expertise in these areas, ensuring your financial responsibilities are managed without the juggling act.

2. Accruals and Deferrals Management

Check your monthly expense accruals and deferrals, and ensure you have money in the proper accounts to cover bills when they come out of your account. Also, review your accounts receivable to estimate how much and when those incoming payments will hit your accounts. Depending on your cash flow, this may be a juggling act or simply a verification that everything continues to run smoothly.

This is an opportunity to consider the effectiveness of your collections process. Can you count on most customers to pay those bills on time? It also creates a window into your ability to pay bills when they are due. You rely on vendors, suppliers, and service providers to run your business, so keeping these relationships strong is essential to ensuring you can meet your obligations. 

3. Comprehensive Financial Reporting

We recommend that you have a robust system of financial reporting so that you can keep financial statements up-to-date and have the financial data you need to make data-intelligent business decisions. At the very least, you need to see your cash flow statement, balance sheet, and income statement every month to make the most informed decisions for your business.

Ensure you’re keeping the documentation you need to meet any financial audit requirements. If your company isn’t required to have audited financial statements, you may still need these reports and records for review or compilation in-house or through a remote CPA. At DHJJ, we help businesses find that month-end and year-end rhythm with streamlined processes, financial services, and fractional CFO support.

4. Collaboration and Communication

Use shared templates and checklists to keep everyone on the same page and working together. Keep the lines of communication open so that when questions arise, you (and the team) can get the information you need quickly and reliably.

Be clear about who is responsible for what and make sure everyone involved understands the expectations. Communicating what the hard deadlines are for completion is critical. These best practices reduce month-end stress, leading to a smoother process and better working relationships among co-workers.

Ideally, some “closing procedures” start before the month ends or occur all month. This way, you can complete the whole process early in the new month when your findings will be more helpful.

While we do encourage collaboration and communication, accuracy is paramount. So, everyone only needs access to some financial documents and tools to do their jobs.

Too many hands in a file can lead to errors, overwriting of data, duplications, and the inability to determine who did what. Consider limiting access based on roles and responsibilities and using change-tracking capabilities, so you know who made what changes.

Finally, invest in efficient collaboration tools that can track the status of various tasks and automatically keep the team up to date on progress.

5. Streamline Closing Procedures

During the month-end close, you will undoubtedly have hiccups or bottlenecks. You are working with humans, after all. Look at what’s working for you and what needs to be improved. Ask for team input and also suggestions to improve the process.

Stay open to change. But realize that your accounting team must find a rhythm through consistency month-to-month. In other words, keep things the same so they have trouble keeping up.

Gather questions to ask your CPA about how to streamline your reporting further.

DHJJ Can Help with Month End Closing

Is your team feeling overwhelmed with the month-end closing? You may need to find more streamlined processes or look for a full-service accounting firm to oversee the whole process. DHJJ helps businesses find that month-end and year-end rhythm with streamlined processes, financial services, and fractional CFO support. Connect with DHJJ to get started.

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