Have you ever heard someone talk about “closing the books” at the end of the month?
The Month-End Close process, also known as the financial close, is essential for ensuring that your business has a clear picture of its financial health.
But if someone asked you to define it, you might think, “I know what it is, but I can’t quite articulate it.” Let’s clear that up.
What is the Month-End Close?
The Month-End Close is the process of creating a precise, objective record of an entity’s financial position as of the last day of the month. After completing a Month-End Close, your business should be able to provably and accurately state bills owed, receivables due, bank balances, and more.
Such precise, evidence-based data is invaluable. Banks aren’t known for lending money to someone who says their business is “doing fine” but has no documentation to prove it. A sales team cannot gauge the success of their products based solely on instincts. Similarly, management won’t know if course corrections are necessary without a clear understanding of where the company stands financially.
Depending on how you approach it, the Month-End Close process can be messy and time-consuming. However, it doesn’t have to be. Spend less time compiling imprecise, misleading, and rather useless financials, and instead redirect your energy toward the activities that can benefit your entity. Fortunately, there are many actions you can take to make the process smoother and more efficient.
Leverage Accounts Payable Automation Software for Month-End Close Efficiency
A significant part of the Month-End Close involves tracking and recording bills received and paid. By implementing accounts payable automation software, you can simplify this process and reduce errors. Many cloud-based software solutions allow you to easily track bills, automatically code recurring transactions, and streamline the payment process.
These platforms enable vendors to email invoices directly into the system, or you can manually upload them with a drag-and-drop or mass-import feature. The software can automatically match these records to your bank and vendor statements, ensuring that by month-end, you have an accurate, ready-to-go record.
Automate Receipts and Expense Tracking
Who hasn’t looked at a credit card statement and thought, “What did I buy three weeks ago for $283.95 from BOBMYSTERBOX?” By using expense tracking software, you can immediately capture and categorize transactions. With just a snap of your phone’s camera, the software records the receipt and automatically codes the transaction, ensuring you don’t lose track of expenses.
This small step prevents a scramble during the Month-End Close, making the reconciliation of credit card statements much smoother.
Use a Point-of-Sale (POS) System to Track Sales
Manually tracking sales can be time-consuming and prone to error. A Point-of-Sale (POS) system automates this process by allowing you to record sales via bar-code or QR-code scans. The system can be tied to your inventory so that as sales are made or inventory is received, inventory is adjusted automatically in real-time. This relieves a significant record keeping burden, helps you get a head-start on month end inventory reconciliation and creates an audit trail for changes to inventory.
Additionally, POS systems allow the ability to have sales setup to receive ‘tags’ that will later allow you to create insightful reports mixing, matching, slicing and combining your sales data in any way you can imagine.
Get a Head Start with Interim Reconciliations
Why wait until the month is over to start the Month-End Close? Most financial institutions offer online access to your accounts, which means you can begin reconciling bank and credit card transactions throughout the month. Make sure you take advantage of this! Performing interim reconciliations—whether weekly, bi-weekly, or even daily—spreads out the workload, making the close process far less daunting.
The first benefit of interim reconciliations is that you are able to react quickly to cases of fraud, such as a stolen credit card, by ensuring you are reviewing transactions more often. Next, this process helps you spread out the workload so that you do not need to find a way to insert a massive block of time into your schedule. By implementing interim reconciliations, naturally, you have more checks in place to ensure you are capturing all transactions. Seeing your bank statement show a check clearing when your accounts payable workflow has no such record of a payment being made can let you know that a situation occurred where someone stepped outside the process. By catching this early, you can investigate it while the memory and records of those involved are still fresh.
Don’t Dread the Month-End Close
By leveraging technology, you can transform the Month-End Close into a far more manageable task. Automating processes like tracking bills, managing receipts, and reconciling accounts not only saves time but also reduces the risk of errors. By getting a head start on the process before the month ends, you can spread out the workload and ensure that records are more accurate and up-to-date.
Let Us Help Simplify Your Month-End Close Process
Of course, there’s an even easier way to handle your Month-End Close—let us help! At Wegner CPAs, we’ve helped many clients improve their Month-End Close process through our outsourced accounting services and Client Accounting Advisory Services (CAAS). Our team of experienced professionals can assist you with everything from workflow optimization to leveraging the latest automation technologies, all backed by our firm’s 75 years of experience. Learn more about how we can help your business here. QuickBooks user? Download our QuickBooks Month-End Close Checklist to jumpstart your month-end close process.
