The end of each month can be an overwhelming time for SMB owners. Amidst the chaotic responsibilities of managing their business, the month-end close process can add considerable stress. However, proper execution of the month-end close is crucial to keep track of of the financial health of your business and to be able to plan for the future.
Timely and accurate close results in -
· A reliable accounting system
· Better and more well-informed business decisions
· Simplified tax filing
· A cleaner financial audit
First, what exactly is month-end close? Simply put – it is the process of reconciling your business’s financial accounts and preparing financial statements at the end of each month. The objectives of the month-end close are to ensure accuracy of financial data, to identify any discrepancies, and to help make smarter, more well-informed management decisions.
Every business has its own set of activities for close but some uniform tasks to be completed usually include –
· Closing the accounting period in the company’s accounting software.
· Reconciling all bank accounts and credit cards.
· Reconciling inventory differences
· Journal entries for insurance, rent, or mortgages.
· Comparing budgeted to actual.
· Preparing reports for management and/or investors.
The process can be time-consuming, and hence, proper planning and delegation of work is essential. It’s important to adopt technology that automates certain tasks in order to make the close process efficient. Using accounting software such as QuickBooks or Xero can help streamline the process, reduce errors, and improve accuracy.
Another crucial aspect of the month-end close is ensuring compliance with legal and regulatory requirements. Certain activities such as payroll taxes, sales taxes, and other forms are required to be filed on a monthly or quarterly basis. Staying on top of these requirements and filing on time can help avoid penalties and fines.
It is essential to remember that the month-end close process is not one size fits all. Each business is unique and may have varying complexities that require customized reporting and analysis beyond the basic financial statements. As a business owner, you may need to seek expert advice or consult with your accounting team to establish a process that suits your needs. Additionally, an outsourced accountant can help lighten the workload and provide valuable expertise. If you need help implementing or conducting your company’s month-end close process, contact Bubble Rock Advisors and we can do this for you.
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