Exec 10 - 13-Steps to Closing the Books.docx

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13 STEPS TO CLOSING THE BOOKS1 Closing your books every month is an important bookkeeping task that should be part of your monthly accounting routine. By following the discipline of closing your company’s books on a monthly basis, your company will have cleaner books, be more organized, and the accounting and finance department will have an easier time preparing quarterly and financial statements for investors or external stakeholders.

The following includes a 12-step process to close your company’s monthly accounting records: 1. Tie Out Accounts Receivable a) Verify all clients have been invoiced for work completed during the month. All calculations for revenue recognition are complete based on accrual-based accounting principles. Ideally all invoices to be recognized as and when received (on the day it happens). b) Double check your deposits and monies received have been posted to your accounting software. c) Reconcile your Aging Accounts Receivables report against your Balance Sheet and against your General Ledger. Make any changes or adjustments to ensure all records match.

2. Tie Out Accounts Payable a) Make sure all bills have been paid, in accordance with the payment terms as agreed (if any). b) Double check all automatic bill payments and any recurring payments have been posted to your accounting software (example – loan payments, monthly car insurance payments, etc.). c) Post any outstanding bills to Accounts Payable so you can track what needs to be paid next month or subsequent months (as per payment terms agreed with vendors /specific vendor). d) Reconcile your outstanding vendor bills and vendor statements against your Accounts Payable Reports and your Balance Sheet. Make sure your records match those of your vendors. Make any adjustments or changes.

3. Perform Monthly Reconciliations a) Reconcile Bank Accounts – Reconcile all bank accounts using your monthly bank statements and monthly credit card merchant statements. Print and file the reconciliation reports and bank statements when finished. b) Reconcile Loan Balances and Lines of Credit – Reconcile your loan balances and lines of credit against your monthly statements. Print and file the reconciliation reports.

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Adapted

from:

Edwards,

Michelle,

CPA.

http://cpainerie.com/month-end-bookkeeping-tasks/

“Month

End.

Bookkeeping

Tasks.”

Available

at:

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4. Track your Fixed Assets a) Record your monthly depreciation, for all the fixed assets and amortization for any intangible assets. b) Record your monthly repairs and maintenance expenses if any for specific fixed assets for which the expense was incurred. c) Record impairment costs, if any, in relation to specific fixed asset.

5. Inventory Count and Accounting a) For inventory to be accurate, perform monthly inventory count to reconcile physical inventory and inventory in the books / accounts at month-end. b) Use inventory count to adjust and reconcile books while closing books at the month end.

6. Record Prepaid Income and Expenses Adjustments a) Record your monthly journal entries to allocate your prepaid income and expenses.

7. Write Off Bad Debt a) Write off any uncollectible invoices to bad debt, based on the bad debt policy (if the company has one). In QuickBooks, for example, this can be done using a Credit Memo.

8. Verify all Checks and Invoice Numbers are Accounted For a) Checks and Invoices are generated in numerical order. If any check numbers or invoice numbers are missing, figure out why and record the missing transactions. If they were voided or deleted, make sure you keep a record as to why they were voided and/or deleted.

9. Generate & Review Draft Financial Statements a) Look for any unusual balances, missing items, or mistakes. If anything looks or feels “off” look into it and figure out why the balance seems odd to you. Make any corrections or necessary adjustments 10. Update Budget a) Update your budget and review your budget vs. actual numbers. Determine why some budget amounts are off for the month. Feel free to adjust your budget as needed.

11. Generate & File Final Financial Statements a) Once finalized, generate and PDF the quarterly and/or annual financial statements, and save a copy on your company’s file hierarchy system.

12. Close Books a) If you’re using an accounting software such as QuickBooks, use the “Closing Date” feature, which allows you to lock previous months and protect with a password. This

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keeps yourself and your bookkeepers from accidentally changing previous months.

The “Closing Date” feature can be found under the company drop down menu. If you find any errors later, those errors need to be corrected via adjusting entries in the current period.

13. Back Up Records a) Back up your QuickBooks, Peachtree, or other accounting software.