Comprehensive Month-End Close Checklist Template for Accounting

Introduction

Chaotic, stressful, and frustrating- these are some terms that are often associated with the month-end close process. But, the reality is that the month-end close process is crucial and its effectiveness determines the accuracy and timeliness of financial reports. Infact, a company’s financial decision-making and credibility are heavily dependent on this periodic activity. 

With the right tools and methods, the month-end close process can be transformed from a time-consuming and cumbersome task to a streamlined one. One of those methods is leveraging a month-end close checklist. 

To help you take control and manage your close process seamlessly, this blog provides you with a month-end close checklist, helping you close your books effortlessly each month. 

Detailed Month-End Close Checklist

Let’s dive straight into how businesses can efficiently close their books at the end of the month. A checklist is an ideal way to ensure that you are not missing out on any crucial steps, preventing any potential issues down the line. 

The following month-end close checklist lists down all the steps a company needs to take to generate accurate and timely financial reports. 

Step1: Gather statements and finalize transactions

The first step in the month-end close process is to ensure that all the financial data for the month is collected and uploaded on the accounting system. This enables companies to finalize and process all the transactions for the required  accounting period. 

Key considerations:

• Gather and review all financial records – revenue recognition, monthly accruals (such as utilities and payroll), monthly expenses, cost of goods sold, bank transactions, fixed assets, and intercompay transactions. 
• Verify the validity of the transactions and ensure they are recorded accurately in the accounting system. 

Step 2: Post closing entries for all the transactions

Once all the transactions are reviewed and recorded, the next step is to post all the closing entries in the general ledger for the month. 

Key Considerations:

• Ensure all transactions are recorded accurately. 
• Classify any transactions that are uncategorized or unpaid. 
• Follow-up with clients and vendors for unpaid invoices to finalize the closing entries. 
• If your company maintains sub-ledgers for specific financial transactions, ensure they are closed along with the general ledger.
• Review all financial activities for the month to confirm completeness. 

Step 3: Reconcile all the transactions

After posting closing entries in the general ledger and/or sub-ledgers, the next step is to perform reconciliations for all the accounts in order to ensure their accuracy. The reconciliation process is a critical part of the entire month-end closing process, enabling organizations to identify discrepancies and maintain financial integrity. For optimal results, businesses should leverage an automated accounting system that automates transaction matching based on pre-defined algorithms. 

Accounts to reconcile:

• All bank accounts
• Accounts payables and accounts receivables 
• Intercompany transactions, if applicable
• Fixed assets account and prepaid expenses account
• Credit card transactions

During the reconciliation process, an important step is also to rectify any errors or omissions you come across. An automated anomaly detection software is the best option for handling exceptions seamlessly and ensuring enhanced  accuracy. 

Step 4: Create and review financial statements

With  reconciliation completion and rectification of all  discrepancies, the next step is to compile monthly financial data  and create financial reports. 

Reports to create based on your business requirements:

• Profit and loss statement
• Balance sheet
• Cash flow statement
• Expense reports
• Accounts payable and accounts receivables reports

Once all the necessary reports for the required  accounting period have been created, review them thoroughly to ensure the accuracy and completeness of all the financial information. At this stage, you can make any necessary corrections before finalizing and  releasing the reports. 

Step 5: Analyze financial reports

After generating all the financial reports, you need to analyze and interpret to be better prepared to share insights, share feedback and present findings to stakeholders. 

Key considerations:

• Check the current financial reports against previous months’ reports to understand the financial progress of your company. 
• Identify  any unusual occurrences and determine the root cause. This may be unexpected changes where revenue earned or expenses are concerned. Ensure to recognize if the occurrences are a one-time thing or have occurred due to any other external or internal factors like operations or market changes. 

5 Common Mistakes during the Month-End Close Process

It’s no surprise that accountants often have to work long hours at the end of financial periods. This is because the financial close process requires meticulous attention to detail. However, what poses significant challenges for accounting teams are common errors that further makes the process cumbersome.

To overcome these  challenges, it’s important for businesses to identify these mistakes they are making during the month-end close process. Here’s a list of common mistakes that can make the month-end close process time consuming and stressful: 

• Scattered documents: Businesses, especially large companies, handle vast amounts of  financial data. A majority of time these financial documents are spread across multiple communication channels, making it difficult for accountants to compile all data for an efficient close. The solution for this is to have a centralized digital repository where all the financial information is securely stored and can be easily accessed. 

• Delayed and inefficient processes: A lot of times, companies begin the month-end close process when the financial period is coming to an end. This leads to long hours, rushed work and errors. Moreover, many companies fail to follow a standardized process for closing books, which can result in  significant bottlenecks. To avoid this, businesses need to have a standardized process for closing the books, ensuring that preliminary close tasks are completed before the month-end rush begins. 

• Ineffective workflows and poor team coordination: Another problem that could lead to severe pitfalls at the end of the accounting cycle are lack of defined workflows and poor team coordination. If team members and managers don’t have adequate visibility on the close process, approvals and responses  can get delayed. To eliminate this, companies should implement structured workflows and approval cycles so stakeholders have clear visibility of all the tasks they need to complete for a quick and efficient month-end close. 

• Lack of  automation: A major mistake that some businesses are still making is not leveraging automated solutions for accounting processes. Reliance on manual processes makes an already time and labor intensive process more intense, resulting in employee burnout  at the end of financial cycles. With AI-led automated autonomous accounting solutions the majority of repetitive tasks like data entry and reconciliation can easily be automated. In fact, advanced accounting  softwares are  capable of adequately handling exceptions, anomaly resolution, and providing strategic insights. 

• Failing to document efficient processes: Many companies overlook the importance of effectively documenting efficient month-end close processes. The same is true for efficient accounting processes and workflows. Ideally, after each accounting cycle, companies should make it a point to document all the processes and workflows that worked best for them and helped them achieve a faster close. Overtime this documentation will become a detailed guide, resulting in efficient close cycles.

Benefits of Month-End Close Checklist

Now that we have familiarized ourselves with the common challenges businesses face during month end close, let’s understand the benefits of utilising a  month-end close checklist template. 

Here are are the key benefits of a month-end close checklist:

• Enhanced accuracy and efficiency: Following a month-end close checklist ensures the reduction of errors in accounting workflows, thereby allowing companies to create error-free reports. Additionally, a checklist increases the overall efficiency of the month-end close process by ensuring visibility for all stakeholders and  providing streamlined workflows.

• Improved audit-readiness: Companies should always be audit-ready, especially at the end of an accounting cycle. By leveraging a month-end close checklist, organizations are able to maintain detailed documentation regarding their operational efficiency and financial activities which aids during audits. Further, for businesses leveraging advanced automated accounting systems, they gain access to dashboards and tasks logs which provides a  documented audit trail at any given point, hence improving overall  audit-readiness. 

• Timely financial reporting: Another key benefit of using a month-end close checklist is that companies can create their financial statements in a timely manner. A checklist allows businesses to define, assign and track key close tasks, enabling businesses to  achieve a faster and hassle-free month-end close. 

• Continuous process improvement: A major step in the month-end close checklist involves the documentation of close workflows and processes. This enables teams to identify bottlenecks that are impacting process efficiency and impacting financial reporting accuracy and timelines. Additionally teams are also able to identify efficient processes that are enabling organizations to streamline close tasks.Having these insights, empowers  businesses to have a hands-on guide on how to best approach the next close cycles and improve them periodically. 

How Can Highradius Help Global Record-to-Report Teams Close 30% Faster

One of the major challenges in month-end closing is the time it takes to complete the process. Most organizations take around 5-10 working days to complete the month-end close, and most businesses struggle to  reduce this timeframe. HighRadius’ financial close software  helps businesses accelerate their month-end close, making it faster, smoother, and error-free. Our AI-powered transaction matching software and anomaly management systems gives access to real-time data and proactively identifies errors. Additionally, it also automates manual tasks like financial data collection and reconciliation.

HighRadius’ account reconciliation software ensures that all balances are accurate and consistent across your financial statements. By automating reconciliation, businesses can reduce errors and improve efficiency. Transaction matching enables rapid comparison of large transaction volumes, significantly speeding up the reconciliation process while identifying and resolving the  discrepancies in real-time. Substantiation provides robust documentation to verify the accuracy of financial entries, enhancing compliance and reliability. Journal entry software streamlines the creation, approval, and posting of journal entries, drastically reducing manual effort and potential errors by automating 95% of journal posting.

Together, these solutions from HighRadius transform your financial closing process, enabling a seamless, efficient, and accurate month-end close. Businesses can achieve a zero-day financial close and reduce their month-end close time by up to 30%, ensuring timely and precise financial reporting with 100% accuracy.

FAQs

Q1. What is end-of-month reporting in accounting?

The process of creating, reviewing, and finalizing financial statements at the end of the month is referred to as the end-of-month reporting. It is a crucial process for business from the viewpoint of strategic and financial decision-making, and therefore, should be approached with utter seriousness. 

Q2. What is a month-end close checklist?

A month-end close checklist outlines all the important steps a company needs to take in order to achieve an accurate and timely month-end close. A checklist is the ideal way for businesses to approach the month-end close process as it enables them to be more strategic and achieve a faster close. 

Q3. What is a month-end close process?

During a month-end close process, a company reviews all their transactions, reconciles all accounts, and handles any errors or anomalies in the recorded financial transactions. This is done to ultimately create accurate financial statements at the end of the month and review the company’s financial performance. 

Q4. How long should the month-end close process take?

On an average, businesses take about 5-10 days to complete the month-end close process. This number can vary depending on the size and complexity of the business. There are also steps, like using a month-end close checklist and leveraging automated accounting solutions, that companies can take to accelerate the month-end close process. 

Q5. What role does technology play in the month-end close?

Traditionally, the month-end close process has been a time-consuming and stressful process for finance professionals. The use of advanced technologies however, has made the process much more simpler and efficient by automating tasks such as data entry, reconciliation, and anomaly management. 

Q6. Can the month-end close process be accelerated?

Yes, the month-end close process can certainly be accelerated. Here are a few ways in which companies can achieve a faster month-end close:

• Use a month-end close checklist
• Use autonomous accounting software to automate preliminary tasks 
• Have a centralized digital repository for financial data

Q7. How can a company improve its month-end close process?

A company can continuously improve its month-end close process by leveraging a month-end close checklist, automating tasks like data entry, transaction matching, and anomaly detection and resolution, and ensuring the documentation of all effective workflows and processes.