Carving out time for financial accounting tasks can be difficult. This is true for many businesses, as finances can easily be put on the backburner. Avoid falling behind and consider the following month end closing procedure process.
Month End Closing Procedure Process
No matter how big or small your business is, closing procedures are a necessary component at the end of every month. Consider the following month end closing procedures so you are prepared for the following month.
Record Incoming Cash:
If you accept cash, it’s important to record the funds you received for that month. It can be in the form of revenue, loans, or invoice payments. However, it’s important to compare your records with the amount of incoming cash you have to be sure there are no discrepancies.
Review Petty Cash:
If you use petty cash, record all of the receipts for the items you used petty cash for that month. Balancing those transactions with the remaining petty cash can be helpful. It’s best to appoint one trusted person to take from the petty cash fund as multiple hands can make it much more difficult at the end of the month.
Update Accounts Payable:
If you don’t record business transactions every day, they need to be completed by the end of the month. While it’s advisable to regularly update your records, keep your receipts and jot down your purchases so you can easily get your accounts payable in good shape by the end of the month.
This step essentially involves double-checking your records with outside entities, most commonly the bank. A bank statement reconciliation can be helpful as it can help you discover any errors before you close at the end of the month. Some common accounts you should reconcile include your bank accounts, loans, and any prepaid or accrued accounts. You should also reconcile your revenue and expense accounts.
Monthly inventory counts should be done at the end of the month as it can determine what you’ll need for the following months and help you determine inventory trends. Some months may require more than others so regularly compiling the data can help you effectively understand your inventory needs. This is especially helpful for businesses that have perishable inventory.
Examine Fixed Assets:
Fixed assets are often large and depreciate in value over time. Because they do not directly convert to cash, they still need to be assessed. Common fixed assets include vehicles, furniture, and even your office building. Record any payments towards your fixed assets at the end of the month.
Organize and Review Statements:
Some helpful statements to organize and review include your general ledger, business balance sheet, and profit and loss statement. Organizing these at the end of each month can be really helpful at the end of the year as you’ll have the prior twelve months in good order. This is great for your end-of-the-year finances and during tax season. It’s advisable to consider online book keeping services for your business. This can help during busy times and ensure that you don’t get behind at any point throughout the year.
Review Information Before Closing:
It can be extremely helpful to have someone double-check your work at the end of the month. Having a second set of eyes examine your work can help you find anything you missed and also give you peace of mind once you have finished. One issue with this is that many businesses don’t have the ability to properly complete the financial accounting tasks in the first place, let alone have someone take the time to double-check it. Consider monthly bookkeeping services as they are cost-effective and can easily do much of your business’s financial accounting tasks.
Prepare for the Following Month:
Avoid falling behind on accounting tasks by planning for the following month. Utilize online bookkeeping services as outsourcing your accounting tasks can be highly beneficial. With the extra time on your hands you can easily focus on replenishing inventory, improve business efficiency, and focus more time on your big-picture business goals.