Month-end accounting may not be the most exciting part of running a business, but it serves an important purpose. A consistent month-end process helps make sure your financial records reflect what actually happened during the month—before errors, missing transactions and unanswered questions have time to accumulate.
For a small-business owner, month-end doesn't need to mean spending hours poring over accounting reports. Much of the work may be handled by a bookkeeper, internal employee or outside accounting resource. What matters is having a reliable process, knowing who is responsible for each part of it and making sure someone is reviewing the finished financial information. That approach closely reflects Julie's emphasis on creating a repeatable accounting process and coordinating effectively with the people already supporting the business.
1. Reconcile Your Bank and Credit-Card Accounts
Reconciliation is one of the most important parts of the month-end process. Your accounting records should be compared with your bank and credit-card statements to make sure transactions have been recorded accurately and account balances agree.
This process can uncover missing transactions, duplicate entries, incorrect amounts, outstanding checks and other discrepancies. Without regular reconciliations, errors can carry forward from month to month and eventually affect the reliability of your financial statements.
2. Review Accounts Receivable and Accounts Payable
If your business invoices customers, review your accounts receivable to see what is outstanding and how long invoices have remained unpaid. An old receivable may indicate a collection issue, but it could also point to something as simple as a payment that was received but never properly applied.
Accounts payable deserve similar attention. Make sure bills have been entered correctly, payments are reflected and outstanding obligations are accurate. Reviewing both sides gives you a clearer picture of money the business expects to receive and bills it still needs to pay.
3. Make Sure Payroll Is Properly Reflected
Payroll involves more than the amount deposited into employees' bank accounts. Wages, payroll taxes, employee withholdings, employer taxes and benefit-related items may all need to be recorded correctly in the general ledger.
If you use an outside payroll provider, don't assume that automatically means your accounting records are correct. Payroll reports and the general ledger should work together. Julie's Accounting + Financial Guidance service specifically includes coordinating payroll information with the general ledger and working with outside payroll providers when needed.
4. Look for Transactions That Don't Make Sense
Month-end is a good time to scan your accounts for anything unusual. Are there expenses that seem unusually high? Negative balances where you wouldn't expect them? Transactions sitting in an uncategorized or miscellaneous account? Owner payments recorded as business expenses—or business purchases accidentally treated as owner distributions?
You don't need to personally resolve every accounting question. The goal is to notice something that doesn't look right while the transaction is still recent enough that you or your accounting team can determine what happened.
5. Review Your Balance Sheet
Small-business owners often focus almost exclusively on the profit-and-loss statement, but the balance sheet deserves regular attention too. It shows what the business owns, what it owes and the owner's equity at a particular point in time.
Review bank balances, loans, credit cards, accounts receivable, accounts payable and other significant balance-sheet accounts. If a balance doesn't seem reasonable—or you can't explain what it represents—that is worth investigating. A clean balance sheet is also important when financial records are eventually used for tax preparation, financing or other professional review.
6. Review Your Profit-and-Loss Statement
Once the underlying accounting is in good shape, review the month's income and expenses. Compare the results with prior months, the same period last year or your budget if you have one. Look for significant changes that deserve an explanation.
The purpose isn't simply to determine whether the bottom line is positive. A monthly review can help you identify missing revenue, expenses that were categorized incorrectly or changes in the business that deserve further attention.
This is also where accounting begins to connect with financial guidance. Accurate reports provide the foundation; understanding what those reports mean for the business comes next.
7. Document Questions and Resolve Them Promptly
One of the easiest ways for accounting problems to accumulate is to leave questions unresolved. A transaction gets placed temporarily in an uncategorized account, someone intends to research it later, and six months pass.
Create a simple process for identifying questions and assigning responsibility for resolving them. Your bookkeeper may need information from you. Your CPA may need clarification from the bookkeeper. A payroll provider may need to correct something in its records. Clear responsibilities and timely communication help keep small questions from becoming larger cleanup projects.
8. Close the Month—and Keep a Consistent Routine
Once reconciliations are complete, questions have been addressed and the financial statements have been reviewed, the month can be considered complete. The exact process will vary by business, but consistency matters more than creating an elaborate system.
Julie works with business owners to establish practical monthly or quarterly accounting processes, clarify responsibilities and coordinate with existing bookkeepers, payroll providers and internal staff. A good month-end process should make the accounting more dependable without making it unnecessarily complicated.
Better Month-End Accounting Creates a Better Starting Point
Reliable accounting doesn't answer every business question, but it gives you much better information from which to ask those questions. It also means that when tax season arrives, a lender requests financial statements or you need to make an important business decision, you aren't starting by trying to figure out whether your numbers are accurate.
Julie Moran, CPA helps small-business owners maintain more consistent financial records, strengthen their accounting processes and turn month-end reporting into something useful rather than simply another administrative task.
Would you like more confidence in your company's monthly financial information? Schedule a conversation with Julie https://calendly.com/julie-juliemorantax/30min
about your current accounting process and where CPA-level guidance could help.
Frequently Asked Questions About Month-End Accounting
Does every small business need a month-end accounting process?
The appropriate process depends on the size and complexity of the business, but regular accounting review is important for maintaining reliable financial records. For many small businesses, monthly review provides a practical rhythm.
What is the most important part of month-end accounting?
There isn't one task that stands alone. Reconciliations, accurate transaction categorization, review of balance-sheet accounts and resolution of discrepancies all contribute to reliable financial statements.
Should I review both my balance sheet and profit-and-loss statement every month?
Generally, yes. They provide different information about the business. The profit-and-loss statement reports income and expenses over a period of time, while the balance sheet provides a snapshot of assets, liabilities and equity at a particular date.
Can my bookkeeper handle the month-end close?
A bookkeeper may handle many or all of the routine month-end tasks, depending on their role and experience. A CPA can provide additional oversight, review financial information, identify discrepancies and help make sure the accounting supports tax preparation and other financial needs.
What if my business doesn't have a formal month-end process now?
You can start by identifying which accounts need to be reconciled, what reports should be reviewed, who is responsible for each task and how accounting questions will be resolved. The process can then be refined based on the needs of the business.
This article provides general educational information and is not intended as individualized accounting, tax, financial or legal advice. The appropriate accounting processes for a business depend on its circumstances and reporting needs.
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