Month end is always a crucial and busy time for every business setup and organization. The authorities must close the accounting books for the month after following a proper month-end close process. It involves a lot of major and minor steps that can set the business on the path to progress and profitability.
The month-end close process can make the authorities nervous and excited simultaneously. The same can lead to errors and mistakes in manual handling. Relying on the accounting software is the best strategy to efficiently handle the month-end close process, so you must try it.
Dig deeper into the details of this article to get your hands on the steps for the month-end close process for beginners and ensure to accomplish it without mistakes and issues.
Top 6 Steps to Follow for Month-End Close Process
The month-end close process is necessary for every business to put an end to the financial activity of the previous month. It helps identify the mistakes and progress of the previous month and better prepare for the next one. Following a few steps can make the process more efficient and reliable, so follow them diligently.
Here are the major steps you can follow for the month-end close process while ensuring accuracy and reliability.
1. Record Incoming Cash and Accounts Receivable
Recording the incoming cash and accounts receivable is the basic step in the month-end close process. The organization or small business setup should be aware of the income generated by its sales and services in the month. Taking notice of account receivables generated through debt repayments or late payments is also crucial to know the total income of the setup. Managing and calculating all of this has higher chances of error. Many setups consult Xero accounting UAE suppliers to invest in the software to automate the month-end close process and enjoy the progress.
2. Review Expenses and Accounts Payable
Reviewing the expenses and accounts payable is the next step in the month-end close process. It offers detailed insights into the setup expenses, which can be to clear the bills, get the raw materials, or provide salaries to the employees. Reviewing accounts payable is another crucial part of the process as it helps the authorities clear the outstanding payments in return for products or services. It helps them develop reliable relations with the vendors and suppliers while getting clear insights into their monthly expenses. It can also help them notice areas to cut down expenses for the future.
3. Reconcile Accounts
Reconciling the accounts is the most crucial step in the month-end close process you should never miss. It compares two accounts to look for mistakes and errors or ensure everything matches perfectly well and holds no ambiguity. You must implement reconciliation on assets, liabilities, and equity accounts to ensure perfect account balance. Doing so manually can be hassle-free and leaves room for human error, too. Therefore, investing in accounting software is the best strategy to complete the month-end close process with a few clicks only. It also ensures perfect accuracy and reliability, so you have nothing to worry about.
4. Review Fixed Assets
Reviewing fixed assets is the next step in the month-end close process you must follow diligently. Fixed assets include property, equipment, and machinery, which can be used to conduct business operations and generate income and revenue through it. Reviewing such assets at the end of the month allows the authorities to reconsider their tax planning and strategy. It helps them evaluate the depreciation schedule and utilize measures and strategies to boost cash flow. You can always refer to the experts or automated resources if you cannot manage it on your own.
5. Review Financial Documents
Reviewing the financial documents is the next month-end close process every setup should handle efficiently. It includes financial statements, records, and all sorts of documentation. Managing the receipts, invoices, and other documents from banks, clients, and other parties falls into the same category. No matter how updated and efficient your record books are, managing the document is crucial for every business. It serves as evidence of all your records and can help you refer to them in case of any ambiguity.
6. Review All Information
Reviewing all the information is the last step you must implement in the month-end close process. It is necessary to ensure the accuracy and reliability of the information. It is also a chance to recheck for mistakes and errors before it is too late. You can check information like the revenue number, inventory level, cash amount, fixed assets, general ledger, balance sheets, and income and expense accounts. You can consult accounting services and invest in the software to automate the whole process instead of handling every little detail manually.
Are you concerned about the month-end close process?
The month-end close process can make you nervous, anxious, and on the edge if you handle it manually. A little mistake may affect your whole accounting year. So, consult experienced accounting services to automate your month-end close process, eliminate the anxious feeling, and enjoy reliable results.