Six Good Ideas for Closing your Books Each Month


Sep
7
2017

When speaking with potential clients, one of the items we often stress is the discipline of Month End Close and our role in it. While accounting by its nature is facing backwards (looking at history), the discipline of making sure you have reported accurately the activity of your business is an important task to master, as these metrics are necessary to predict future events. After all, to be true to your vision you must also be forward facing.

When we say the discipline of Month End Close, we refer to the following examples:

  1. Perform the bank reconciliations. This is the most understated task in any business to a business owner, yet it is the first step that must be performed. You would be right in thinking that it’s costly to pay an outside resource to perform this menial function, however this step is important to segregate from your internal bookkeeper so that you may maintain some internal controls.
  2. Perform variance analysis. Look at this month compared to each of the prior two months. Look at this month compared to the same month last year. Look at this month compared to your budget. Give it some thought: what can you learn from this? Or what steps do you still need to perform given what the variance says? Does it make sense that payroll dollars went up this month compared to last? Does it make sense that the electric bill was $0 this month?
  3. Book some accruals. If you do not maintain books under accrual accounting, do you understand how they differ?  Under accrual accounting, while performing month end close steps, you should be sure to account for any services you purchased during the month where you have not yet received the bill from the service provider (examples could include legal and accounting fees).
  4. Share our findings with the Client. This is a two-step process. Step 1 is telling the client: “In order to close the books, we need your help with the following items.” Step 2 is telling the client: “From our vantage point, here is what we see about your business.”
  5. Build efficiency through automation and use of templates. Along the way we will make sure recurring journal entries are set up, template reports are used, and the report presentation you desire – if not available from your accounting system – is automated as much as possible through use of other tools such as Excel.
  6. Follow the same steps each month. This means you’ll have a checklist for sure, but more importantly it means that you’ll be sure to investigate the same things each month so that month by month you are comparing apples to apples. Be sure to identify items as pre-close and post-close – what can you get done for Month End Close before the month ends.

We do not perform all of these steps for our clients because we are also interested in empowering your staff to be self-sufficient – so we delegate.  At Quincy CFO we try to keep our roles as high-level as possible. How much we train you depends on the time available by your team, and their interest and ability in learning new things.

No two clients are the same, but all of them have a Month End Close checklist and are receiving their monthly reports in a timely fashion. Once we get the process nailed down, building the financial forecast and cash flow model is often the next step.

Where are you in your discipline of Month End close? Contact us to find out what’s possible by adding a little more strength to your accounting process.




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