As a business owner, it’s essential to monitor your business finances to understand your company’s financial condition. One primary task that helps you stay updated is the month-end close process. If you are unaware of this term, don’t worry. This blog post will walk you through everything you must know to close your business books successfully at the end of each month, so you have an accurate picture of your company’s financial condition.
What is the Month-End Close Process?
As the name implies, the month-end close process is the monthly routine of checking, making adjustments, and finalising your company’s records for the month. It is like managing all the loose ends to ensure that everything is accurate before moving forward into the next month. The aim is to have an accurate and clear snapshot of your company’s financial performance, so you can make the right business decisions. This process doesn’t have to be overwhelming. However, it’s crucial to follow a consistent routine, so your records remain accurate and clean. By accessing reliable bookkeeping services in Melbourne, you can leave the burden of monitoring financial records to expert bookkeepers. They will create and follow a consistent routine for the month-end close process.
Why is the Month-End Close Process Important?
Regularly closing your business books every month can provide you with several benefits:
- Accurate financial reporting: With the month-end close process, you will be aware of how much profit you made, how much cash you have, what your expenses are, and if you are on the right track.
- Better decision-making: With accurate data, you can make the right business decisions regarding your growth plans, cash flow, and investment opportunities.
- Tax preparation: Keeping everything updated makes tax season smooth, as you will have all the required documentation ready to go.
How to Streamline the Month-End Close Process?
Now that you have the knowledge and awareness regarding the significance of the month-end close process for your business. The next step is to create a checklist to simplify your closing procedures.
Reconcile your bank accounts
It’s crucial to prepare a bank reconciliation statement. This means ensuring that your company’s internal records match the financial transactions on your bank statement. If you have a professional bookkeeper, then they will:
- Check for any errors or discrepancies between your internal records and the bank statement.
- Find out errors and review any missing transactions.
- Make corrections to any mismatched data immediately.
Check accounts payable and accounts receivable
Next, you must check accounts payable and accounts receivable. Make sure that:
- All outstanding invoices are recorded accurately.
- Any payments received or made are updated in your system.
- You check overdue invoices and schedule payments for outstanding bills.
Keeping these records updated ensures you stay on top of your cash flow and don’t skip any deadlines.
Review payroll records
If your company has employees, it is essential to check your payroll records. Ensure that:
- All payroll expenses are recorded accurately, including wages, salaries, and benefits.
- Deductions and taxes are applied properly.
- Any payroll mistakes or adjustments are corrected.
Payroll errors can result in serious issues with compliance, so this step is vital.
Check your general ledger
Your general ledger contains all your business transactions. For a smooth month-end close, you must:
- Check for incorrect or unusual entries.
- Confirm that all expenses and revenue are categorised correctly.
- Adjust any entries that need to be corrected.
The general ledger is the backbone of your accounting system. Ensuring it’s accurate means that all your financial reports are also correct.
Prepare a financial statement
After reconciling and reviewing everything, it’s time to prepare financial statements. These financial statements usually help the tax return accountant at the time of tax return lodgment, which is why they must be accurate.
- Profit and loss statements
- Balance sheet
- Cash flow statement
Conclusion
By following these simple steps, you can streamline the month-end close process and ensure your company’s financial remains updated and accurate. With reliable bookkeeping services, you will be in a stronger position to make accurate business decisions and drive your business growth.