Month-end closing for Accountants

As an accountant, you understand the importance of accurate financial reporting and timely reconciliations. While many people are familiar with the year-end closing process due to tax reporting, it’s crucial not to overlook the significance of the month-end closing process. Failing to properly close the month can lead to errors in financial reports and have long-term consequences for a business. In this article, we will provide you with an essential guide to month-end closing, including 11 key items to include in your checklist.

Why a Month-End Close Checklist is Important

The month-end closing process involves generating financial reports and reconciling accounts to analyse a company’s financial health. With numerous tasks to handle, it’s easy to overlook critical details or make mistakes. This is where a month-end close checklist becomes invaluable. It helps bookkeepers, accountants, and business owners stay organised, ensure all necessary tasks are completed, and minimise the chances of errors and missed deadlines.

Without a checklist, you may experience discrepancies in financial reports that can lead to inaccurate data for future decision-making. By following a standardised process and using a checklist, you can avoid such pitfalls and streamline your month-end closing procedures.

Key Items for a Month-End Close Checklist

While the specific contents of a month-end close checklist may vary depending on the company and industry, here are 11 key tasks that should be included:

1. Complete Reconciliations for All Bank Accounts and Credit Cards

One of the essential tasks in the month-end closing process is reconciling all bank accounts and credit cards. This involves identifying and addressing any discrepancies between the account balances and their corresponding general ledger entries. By ensuring that the closing balances match, you can identify errors, capture any outstanding transactions, and gain a clear understanding of your business’s cash situation.

2. Reconcile the Loan Balance to the Statement

If your business has outstanding loans, it’s crucial to reconcile the loan balance to the statement. This process involves recording interest expenses and principal repayments promptly, ensuring accurate reporting of the liabilities owed by the business.

3. Secure Copies of Receipts for Capital Items

Capital items represent significant cash outflows for a business. Reconciling the assets account allows you to confirm the balance and post necessary transactions, such as depreciation expenses and recognizing newly acquired assets. By doing this, you ensure that the impact of these transactions reflects accurately on financial statements.

4. Confirm the Suspense Holding Account

A suspense holding account temporarily holds transactions that require further classification or investigation. During the month-end closing process, it’s essential to review and reconcile the entries in this account, ensuring that they are properly classified and posted to their correct ledgers.

5. Reconcile the Payroll Account

Reconciling the payroll account involves confirming the accuracy of employee details, such as names, positions, pay rates, benefits, hours worked, and gross and net pay. This process ensures that payments to employees are correct, and all payroll entries, including accruals and statutory deductions, are accurately recorded.

6. Reconcile the Operating Account

The operating account represents the business’s operating expenses. Reconciling this account involves verifying expense transactions, creating expense reports, and accurately reflecting cash outflows for operating expenses in the profit and loss statement.

7. Reconcile the Accounts Payable Balance

Accounts payable (AP) balance represents the money owed by the company to its suppliers and vendors. Reconciling the AP balance involves comparing the AP ledger with the AP ageing report, investigating discrepancies, and posting relevant journal entries to correct errors. This process helps identify errors, missing documentation, and ensures accurate reporting of pending invoices and liabilities.

8. Reconcile the Accounts Receivable Balance

Accounts receivable (AR) ledger represents the money owed to the company by its customers. Reconciling the AR balance involves comparing customer statements with the AR ageing or specific customer account ledger balances, investigating variances, and posting relevant transactions. This process ensures accurate reporting of receivables, tax deductions, and helps maintain good relationships with customers.

9. Review Profit and Loss Statements for Proper Class Tracking

The profit and loss statements summarise income and expense transactions. Reviewing these statements allows you to confirm that all transactions are correctly posted and that the bottom line accurately reflects the company’s profitability.

10. Review Profit and Loss Month-Over-Month and Investigate Large Variances and Changes

In addition to proper class tracking, reviewing the current and previous month’s profit and loss balances helps identify significant changes in line items. Investigating these variances can reveal underlying issues such as increased spending, lower earnings, or incorrect transaction entries.

11. Review the Balance Sheet Month-Over-Month and Investigate Large Variances and Changes

Similar to the previous step, conducting a month-over-month review of the balance sheet helps confirm the accuracy of balances in assets, liabilities, and owner’s equity accounts. Significant changes in these line items can indicate incorrect or missed postings and potentially reveal issues within the business.

Tips for An Efficient Accounting Process

The month-end closing process is a critical part of a company’s accounting procedures. By following a comprehensive checklist, you can streamline your month-end closing procedures, avoid errors, and ensure accurate financial reporting. The 11 key items discussed in this article should serve as a foundation for your month-end close checklist.

However, it’s important to remember that the best way to make your year-end accounting and business filing tasks as easy as possible is not to wait until the end of the year to do everything all at once. Instead, get ahead of the curve by making accounting and bookkeeping a daily habit. By staying on top of your financial tasks throughout the year, you can reduce the stress and burden of month-end and year-end closings.

Let Singapore Corporate Services Support You

If you need some extra help staying on top of deadlines and managing your accounting and bookkeeping tasks, Singapore Corporate Services offers professional accounting and bookkeeping services. We understand that you want to focus on what you do best while leaving the rest to experts. By doing so, you can stay ahead of your financial obligations.

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