10 steps for a successful month-end close process

The month-end close is a process meant to ensure accurate and reliable financial reporting for you and your business. It involves reviewing financial records, journal entries, invoices, and statements with the goal of reconciling every recorded transaction. 

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Companies large and small rely on the month-end close for their ongoing financial reporting and planning—and so should you. In this article, we’ll walk you through 10 strategies for executing a month-end close that you can begin applying immediately. First, though, we’ll explain what the month-end close is, the kinds of information you’ll need on hand, and the accounting process involved. 

What is the month-end close?

The month-end close is a rigorous review aimed at reconciling every recorded transaction during a 30-day accounting period. This end-of-the-month procedure seeks to square all financial activity with tangible financial evidence, verifying that they align precisely. 

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However, the month-end close process extends beyond mere reconciliation. It encompasses the review and adjustment of accruals, deferrals, and provisions.

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Once reconciliation and adjustments are complete, the next step is month-end reporting. This is where the financial results of the month are summarized and presented. It includes details such as revenues earned, expenses incurred, and any profits or losses. 

What information do I need to complete a month-end close?

To successfully and accurately execute your month-end close, you’ll need to ensure that you and your accounting team have these key pieces of information on hand. 

1. Financial records: Collect all financial documents for the month, such as invoices, bank statements, transaction details, investment ledgers (if any).
2. Revenue documentation: Your revenue ledger should provide the details of all sources of revenue by line of products or services, making sure to accurately record sales, services rendered, and any other income.
3. Costs for providing services and revenues: Make sure to categorize any expenses incurred to generate revenue, such as hosting expenses from Google Cloud or invoices from other providers, in Cost of goods sold or services provided (COGS). 
4. Accruals and deferrals: Identify any expenses or revenues that have occurred but haven't been officially recorded (accruals) and any items that have been recorded but have not yet happened (deferrals). 
5. General ledger: Compile a comprehensive overview of all financial transactions recorded in the general ledger during the month.
6. Reconciliation statements: Prepare credit card and bank reconciliation statements to match recorded transactions with actual account balances.
7. Expense tracking: Make sure all business expenses (including expense accounts) are accurately categorized and accounted for, including any outstanding or prepaid expenses.
8. Inventory records: Review inventory levels and costs to validate the accuracy and adjust any discrepancies.
9. Fixed assets: Update records of fixed assets, including depreciation and any additions or disposals.
10. Loan and debt information: Verify loan balances, interest expenses, and other debt-related transactions.
11. Employee compensation: Make sure to accurately document salaries, benefits, taxes, and any other payroll-related items.
12. Prepaid expenses: Confirm any prepaid expenses and distribute them over the appropriate periods.
13. Income and sales tax: Review income and sales tax obligations.
14. Financial statements: Generate financial statements, such as the income statement, balance sheet, and cash flow statement, using the compiled data.

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By meticulously gathering, organizing, and reconciling these components, you lay the foundation for a successful month-end close. 

5 steps to streamline your month-end close process 

The month-end close process can be both time-consuming and resource-heavy—but it doesn’t have to be. These easy-to-follow strategies can help you to ensure an especially efficient and accurate month-end close. 

1. Create a month-end close checklist: A month-end close checklist can be used to assign responsibilities and lay out a timeline for when tasks are expected to be completed. 
2. Use templates: Pre-designed templates for financial statements, reconciliations, and other documentation can help you to expedite the month-end process while maintaining consistency and accuracy.
3. Embrace automation: Automating repetitive tasks can significantly enhance the efficiency of your month-end financial close. It saves time and also reduces the likelihood of manual errors.
4. Reconcile regularly: Implement periodic monthly reconciliations rather than waiting until month-end. This practice prevents a last-minute rush and allows for early detection and resolution of discrepancies.
5. Conduct a pre-close review: Before finalizing the month-end close, perform a pre-close review. This entails a comprehensive assessment of all financial data, reconciliations, and adjustments. Address any discrepancies or issues before completing the process.

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By integrating these best practices into your month-end close routine, you pave the way for a streamlined, error-reduced process that yields accurate and insightful financial reporting.

The benefits of a faster month-end closing process

Completing a month-end close can be both resource-heavy and time-consuming for you and your accounting team. Optimizing the speed of your month-end close offers several benefits for your business:

• Availability of information: The primary goal of financial reporting is to provide information to management and other key stakeholders. The sooner you make your financial reporting information available, the sooner your team can assess the health of operations and make important decisions about next steps.
• Operational efficiency: Speeding up your month-end close can frees up time and resources that can be allocated to other important tasks. This increased operational efficiency can allow for a more agile response to changing market conditions and business needs.
• Timely decision-making: By executing a faster close, you and your accounting team will be able to make financial reports available sooner. This can in turn enable better decision-making based on up-to-date and accurate financial information. 

• Stakeholder confidence: A swift, streamlined month-end close enhances transparency and demonstrates effective financial management. Timely and accurate reporting instills confidence in stakeholders, including investors, lenders, and business partners.

How Ramp can simplify your month-end close process

With its comprehensive suite of features, Ramp offers a range of benefits to enhance your business's close operations and financial management.

• Automated categorization and syncing to accounting software: Ramp's accounting automation software provides a powerful answer for month-end closing responsibilities. By accurately organizing expenses and linking them effortlessly with your accounting system and software, this does away with the need for laborious manual entry and guarantees that your financial documents are precise and up-to-date.
• Efficient data management: Ramp simplifies data entry, storage, and retrieval, making sure your financial information is organized, accessible, and accurate. 
• Automated reconciliations: Ramp's intelligent algorithms automate reconciliation tasks, swiftly identifying discrepancies and flagging potential issues. 
• Tailored reporting: Generate tailored financial reports with ease, thanks to Ramp's customizable reporting capabilities. 
• Enhanced collaboration: Ramp facilitates seamless collaboration among your finance and operational teams, offering a unified approach to month-end closures.
• Streamlined compliance: Effortlessly maintain compliance with financial regulations and standards by utilizing Ramp's included compliance features.

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Experience increased efficiency, accuracy, and collaboration, all powered by advanced spend management software. Ramp empowers you to optimize your close operations, enabling your business to thrive in the realm of financial management.