LET’S GET STARTED
- 1 What is a Month-End Close?
- 2 The Month End Closing Procedure Checklist
- 3 Want To Learn More About Closing the Books?
We’ve all been there. The month is ending and it’s time to begin the month-end close process for your startup.
What seemed like an easy task when you started your business turns into a huge headache as you have to hunt down missing numbers, double-check your data and catch up on the backlog of transactions you still have to record.
For startup veterans, this might be giving you flashbacks. For those looking to launch a startup or a fledgling startup accountant, it might add an extra layer of intimidation. No matter how mature your business is, a month-end close checklist can help cut down on the stress. We’ve got the tips needed to understand a month-end close checklist, and how to prepare one for your own business.
What is a Month-End Close?
If you’re new to startup accounting, you might not be clear on what a Month-End Close is. In simplest terms, it is the procedure by which you review, record, and reconcile your financial information. This makes sure that every transaction in the previous month was properly recorded and that your business has an up-to-date picture of its finances.
What Do You Need For a Month-End Close?
Before we go through the checklist, you need to get your documents ready. Exactly what you’ll need for a Month-End Close can depend on the kind of business you operate, and how your accounting structure is set up. Some of what you might need includes the following:
- Balance Sheet
- Cash Flow Statement
- Income Statement
- Profit and Loss Statement
- Revenue Information
- Inventory Information
- Banking Information
- Asset Information
- Financial Ledgers
The Month End Closing Procedure Checklist
Now that you have your information ready, it’s time to make your month-end close checklist. By breaking the month-end close process into a series of steps, what seems like a monumental task can turn into a smooth and repeatable process.
1. Cash Received
Firstly, you should ensure that all cash received during the month is logged. Remember that this doesn’t just mean revenue - check your invoice payments and loans as well. All of these count as cash received by your business.
2. Purchases and Invoices
Even if invoices haven’t been paid for, you should log all of them and how much money you have outstanding. Every receipt should be logged and noted down. You should also make sure to note when all of these invoices and receipts are going to come due.
3. Account Reconciliation
The next step is to reconcile all your accounts. You need to match your statements to those from outside entities, such as banks. Make sure to reconcile cash, checking, prepaid, and saving accounts, as well as all bank loans. This step will help you catch any discrepancies between accounts.
4. Fixed Asset Depreciation
Next, it’s time to record the value of your fixed assets, such as buildings, equipment, land, and vehicles. These assets are handled separately because, unlike other assets, they cannot be easily turned into cash. They’re also different in that their value tends to depreciate over time - so use this step to do a reevaluation on how much they are worth.
5. Inventory Count
The next step is to do an inventory count, letting you get an accurate record of your inventory in your books. By doing this step every month you can learn how frequently you need to restock certain items.
6. Financial Statements
Now it’s time to handle the financial statements. These include your general ledger, your business balance sheet, and your profit and loss statements. Make sure that all of your journal entries are up to date for the end of the month. Making sure these are accurate will help save a lot of confusion. They can also give you a better idea of how your business is doing at the end of the month.
For those rusty on the types of financial reports, here’s a quick recap:
- The General Ledger is a list of all the financial transactions that have gone on during the month at your business. This detailed list is invaluable when trying to follow the movement of cash.
- The Business Balance Sheet is a snapshot of all of your assets, liabilities, and equity as of the end of the month. This shows how much your startup is worth now.
- The Profit and Loss Statement notates all the revenues, costs, and expenses for the month. This helps you understand what is making your startup the most money, and what is costing it the most money.
7. Close the Period
Once you’ve gone through all the previous steps, now it’s time to close the period! This final step in the month-end close process involves making sure that all of your accounting software is no longer adding any new data for the month, and rolling all new data into the next month.
Want To Learn More About Closing the Books?
We understand that bookkeeping can be difficult. Even with the best bookkeeping tools, it can be difficult for new startups to handle managing all their accounting needs on a month-to-month basis. A checklist can help make sure nothing vital is missed or forgotten.
At Punch Financial we specialize in providing high-growth companies with modern accounting experience and the implementation of accounting systems. Instead of hiring an in-house CFO at great expense, you can outsource your strategic needs to a firm with proven results for a fraction of the cost.
Our mission is to help you streamline your back office and to provide you with actionable data and reduce your overhead. Let’s connect to give you a customized quote and free consultation. You have nothing to lose but so much to gain.