Monthly Accounting Checklist – If you’re like many startup founders, the bookkeeping chores that accompany building a successful business take time and energy away from the more important tasks that require your attention.
One of the most common stumbling blocks for startups and small businesses—specifically when it comes to bookkeeping and accounting—is properly closing the books at the end of the month. This is especially true for companies that don’t have established accounting systems or month end close procedures in place.
So, what can you do to make your startup’s month end close less of a hassle? The answer to that question is the same as the solution to so many problems in business and in life: Get organized.
When it comes to organizing your month end close, an excellent way to get started is with a monthly accounting checklist.
In this article, we’ll go into greater detail about what the month end close is, how it works, and why it’s necessary—as well as walk you step-by-step through a sample monthly checklist. But first, let’s take a broad look at the ways a checklist can improve your month end close and, consequently, the financial health of your business.
Why You Need A Monthly Accounting Checklist
1. It helps you catch mistakes.
Regardless of the industry in which your business operates, chances are it engages in a large quantity of transactions in a given month. The more transactions that occur, the greater the possibility for any one of them to be entered incorrectly or forgotten entirely. Unrecorded expenses can cause problems for your business both when you’re assessing its profitability and when the time comes to file your taxes.
A month end closing checklist can help you quickly identify and fix any discrepancies, remember things you might otherwise have forgotten, and spot potentially costly mistakes.
2. It helps you make better decisions.
It’s impossible to underestimate the importance of accurate accounting reports when it comes to running your business. It’s these reports that allow you to evaluate your company’s financial health, identify problems, and make the best decisions for the future of your business. Additionally, accurate reports allow outside parties like lenders, investors, and analysts to gain a clear picture of your company’s position and performance.
Implementing a monthly accounting checklist ensures greater accuracy in financial reporting—and all the benefits that go along with it.
3. It helps keep your business agile.
The more quickly you receive the previous month’s financial reports, the more quickly you can analyze them, spot problems, and make the necessary changes to mitigate financial damage.
Because of the complexity of the closing process, it’s often a time-consuming task. A monthly accounting checklist helps you increase the efficiency of your close by providing a sensible list of tasks that you need to accomplish, along with the sequence in which you need to complete them. Additionally, you may be able to adjust your business’s month end closing process to get the information you rely on most with fewer delays.
4. It helps you stay audit-ready.
By effectively implementing a well-thought-out month end close checklist, catching and correcting errors early, and improving turnaround time for reporting, you’ll ensure your company is ready for audit at the end of every month. Furthermore, because your monthly reports are accurate and organized, preparing your year-end financial statements will require less time, effort, and money.
Now that you have a general sense of the advantages of using a monthly accounting checklist, let’s dig a little deeper into the month end closing process itself.
Understanding Your Month End Close
Throughout the course of the month, someone in your business (usually a bookkeeper, accountant, or office admin) records all the business’s financial transactions—first to journals and then to the general ledger. Alternatively, depending on your company’s accounting procedures, your accounting and bookkeeping software may perform some of those tasks automatically.
Either way, as each month ends, the designated person in your business needs to close those books and compile the data into reports so you have a clear understanding of what occurred financially during that period of time and a clean slate to work from the next month. The monthly closing process is how you get there.
The closing process itself is relatively straightforward and consists of four basic steps that involve moving the balances from temporary income statement accounts to your permanent Retained Earnings account:
- Close revenue accounts to income summary
- Close expense accounts to income summary
- Close income summary to retained earnings
- Close dividends to retained earnings
Fortunately, most accounting software automates this four-step process, so all you need to do is check a box to receive your balanced financial statements and a general ledger ready for the next period. Unfortunately, a lot of work needs to be done before those steps can occur.
Monthly Accounting Checklist: What You Need To Do Before You Can Close
The specific nature of your business, the industry in which it operates, and how you handle your bookkeeping and accounting (e.g., which tasks are automated, whether you rely on an internal finance team or an external service, etc.) will ultimately determine the specifics of your monthly accounting checklist and the timetable on which it occurs. The example below, though, is a good place to start if you’re just beginning to streamline your month end close.
- Confirm all transactions that occurred during the month.
- Confirm all timesheets have been submitted and approved, then enter/import payroll.
- Confirm all expense reports have been submitted and approved.
- Confirm all accounts payable bills (including recurring bills) have been entered.
- Confirm all accounts receivable invoices (including recurring invoices) have been entered.
- Confirm all credit and debit charges have been entered.
- Post closing entries to the general journal.
- Post accruals, deferrals, and reversals.
- Review and post revenue recognition according to revenue schedules.
- Post depreciation and amortization, along with any other expenses and revenues.
- Ensure all entries that should have occurred on the month’s books are entered accordingly.
- Check for and—if necessary—close subledgers.
- Check for transactions still pending approval, recurring transactions that failed, and transactions left in draft form.
- Reconcile all necessary accounts.
- Reconcile all bank accounts to their corresponding statements. (If you have high-volume accounts, you may want to perform reconciliations on a weekly or even daily basis).
- Reconcile all charge accounts.
- Reconcile accounts payable aging report to subledger, then to the general ledger.
- Reconcile accounts receivable aging report to subledger, then to the general ledger.
- Reconcile work in progress, fixed assets, and prepaid accounts, as well as any deferred revenue accounts.
- Reconcile physical inventory to inventory in the general ledger.
After you’ve completed these steps (or some variation of them), you’ll be ready to run the reports in your accounting software, then review them to assess your financial situation and adjust future plans.
Additionally—especially in the early stages of streamlining your monthly closing procedures—it’s important to do a thorough post-mortem, including providing a forum to share feedback on what worked and what didn’t, as well as brainstorm ways to improve the process in future months.
Let Zeni handle your startup’s monthly close.
At Zeni, we combine cutting-edge AI-powered accounting software with a team of experienced finance professionals to close our clients’ books within five days of the month’s end.
In tandem with AI automations, our finance team performs daily bookkeeping in compliance with GAAP standards to ensure the most accurate and up-to-date financials and insights are reflected via the Zeni Dashboard.