Whether you have a third-party performing your digital accounting services or you have an internal accounting team handling the bookkeeping tasks, there’s one important procedure neither team should be missing: your books’ month-end closing. If you’re leaving your books open throughout the entire fiscal year, you’re also leaving your business open to inaccurate data, useless reporting, and costly financial errors.
What is the Monthly Close?
When it comes to your finances, the month-end close is when your accounting team reviews, records, reconciles, and reports on your month’s revenue, purchase orders, sales orders, cash, assets, inventory, and bank accounts.
The monthly close places a lock on your financial data, which does two things: it prevents you from adding data and falling behind on your records and it protects the integrity and accuracy of your data.
Why Month-by-Month?
It may be frustrating to go through your financial records every single month. But what could be more frustrating is refiling your taxes, rebuilding your reports, or explaining to the government why you underreported tens of thousands of dollars in profit. Unfortunately, companies large and small have discovered how one minor error in their books can snowball into a major headache.
This biggest benefit of month-end closing is accuracy. It’s much easier to get a handle on your books month-by-month than it would be at the year’s end because your data is divided into smaller pieces. A duplicate record or a missing transaction doesn’t pose nearly the same threat when it is caught early.
Small mistakes that aren’t caught early can have major financial repercussions, as plenty of national brands have seen. According to The Wall Street Journal:
- A mistake in calculating revenue caused Seneca to understate revenue by $16.5 million.
- A mistake in expense reporting cost paint maker PPG a $4 million decrease in net income.
- A mistake in tax assets caused Camping World to overstate losses by $47 million.
Another benefit of month-end closing is reporting and decision making. Business owners prefer month-end closing because they have access to reporting that can help them make more informed decisions down the road. When business owners can see trends and patterns month-over-month, they can more accurately predict changes in revenue or even wider changes in the marketplace.
Finally, month-end closing helps simplify audits and tax filing. Your data is accessible, organized, complete, and accurate. Need records from February 2018? Does your accountant have a question about revenue from January 2020? Your data is readily available and easy to find.
What You’ll Need
Month-end closing procedures vary depending on your business and industry, but you’ll most likely need access to your:
- Revenue
- Open Sales Orders
- Purchase Orders
- Fixed Assets
- Accounts Payable/Receivable
- Credit Card Statements
- Bank Statements
- Cash Statements
- Sales Tax Statements
Our team of accountants has put together an exclusive checklist of all of the steps you need to take when performing your month-end close. Download our whitepaper so you have your go-to guide to make your month’s end even easier.
KDG Can Make Bookkeeping a Breeze
We understand that bookkeeping can sometimes fall to the wayside when your business requires dozens of other tasks. One month can turn into two and then three, and then you realize you haven’t recorded your finances for an entire year.
If you need help keeping your finances in order, KDG offers a digital accounting team who can help with bookkeeping, data clean up, consulting, migrations, and more. They can even perform your month-end closings for you! Contact us today so you can learn more about the services we offer.
