Best Practices for a Successful Month-End Close

Create a Checklist, Maintain Workpapers, Leverage Technology

By Daniel E. Gaudet, CPA, Partner and Courtney B. Fraser, CPA, Manager

The timeliness of accurate financial reporting is critical to any business — newly established or years in operation. Timely, accurate financial reporting drives business decisions. Streamlining your month-end close process is, therefore, critical to increase the efficiency and accuracy of your monthly financial reporting. To help your company create or improve its month-end financial procedures, we’d like to share three of our best practices below.  

Create Your Month-End Procedures Checklist

Creating a checklist outlining all procedures that must be completed each month will increase the consistency of your month-end close. For maximum efficiency, the checklist should mirror the order in which the procedures should be performed. For example, your checklist should place recording bank-account transactions as a task that is completed before bank account reconciliation. Following are some common steps that belong on your month-end procedures checklist:

  • Record All Transactions
    • Related to bank accounts, accounts receivable, accounts payable and credit cards.
  • Record Your Month-End Journal Entries
    • For account balance adjustments (e.g., prepaid expenses, accrued expenses, accrued payroll, depreciation, etc.).
  • Reconcile the Bank Accounts and Credit Cards
    • To their corresponding statements.
  • Update Your Monthly Workpapers
    • To support key financial statement accounts and reconcile workpaper balances with their corresponding financial statement balances.
  • Review Your Financial Reporting Package
    • Including reports for the Balance Sheet, Profit and Loss, Cash Flow, General Ledger, Sales Summaries, as some examples.
  • Produce Your Monthly Internal Reporting Package

Maintain Consistent Workpapers

    There are many benefits to maintaining workpapers that support financial statement balances. Workpapers can:

    • Provide both a summary and details of activity in a particular general ledger account.
    • Present data in a manner that is more easily understood by those who may not be familiar with the accounting system.
    • Include additional information and/or notes that may not be contained in the accounting system.

    Consistently prepared workpapers that are used from month to month can also assist in identifying errors. Another benefit to maintaining workpapers that support financial-statement balances is that these will be needed if your financial statements are audited.

    Leverage Technology

    Essential to increasing efficiency and streamlining the monthly accounting close process is to leverage the technology within your accounting system. Knowing the capabilities of your accounting system is key to being able to fully utilize those features in the month-end accounting close and create a quality financial reporting package. QuickBooks Online (QBO), for example, is a cloud-based accounting system known for its intuitiveness. Since QBO is a commonly used accounting software, we outlined a few of the many features it offers:

    • Import Bank Feeds: Also available for credit cards, the QBO bank feed functionality allows bank-account activity to be imported directly from your bank into the QBO checking account register, eliminating the need for manual transaction data entry. When the QBO bank feed is used, the accounting system automates the bank reconciliation process by selecting the transactions that have been recorded or matched through the bank feed. While still requiring some review, QBO automates a great deal of the process, helping the efficiency and accuracy of your bank reconciliations.

    • Automate Recurring Transactions: Transactions that are routinely included in the month-end journal entry process can be set up in QBO to automatically record. For example, a monthly depreciation entry can be established as a recurring transaction to be recorded automatically each month, since depreciation is typically constant throughout the year. However, if a change is needed, QBO allows you to easily update the previously recorded journal entry and/or adjust the recurring transaction setup.

    • Export to Internal Financial Statements: QBO can export to various file types for your internal financial statement reporting. Reports can also be customized and saved to allow for consistent reporting each month, eliminating the need to customize reports at each close. This ensures that you’re producing consistent information for stakeholders month after month.

      Adopting a month-end procedures checklist, supporting workpapers and an accounting system that utilizes technology can significantly help standardize the month-end close process. Consistently applying these guidelines will add efficiency and accuracy to your financial reporting, helping set your business up for success.

      Contact Us

      To learn about other ways to streamline your month-end close process or for help in evaluating the broader accounting needs of your business, contact your PKF O’Connor Davies client service team or either of the following:

      Daniel E. Gaudet, CPA 

      Courtney B. Fraser, CPA