The month-end close, which provides a snapshot of a company’s financial condition, is a critical process for accounting teams. An efficient and accurate close helps leaders make better-informed decisions that improve the financial and strategic health of the company. So how can you make sure the process goes smoothly? Enter the month-end close checklist.
Understanding the Month-End Close
As with many accounting operations, the month-end close is a time-sensitive process. During the close, accounting teams undertake a series of tasks to finalize and close out all financial activity for the month. It involves recognizing revenue; recording expense transactions; preparing, adjusting, and reviewing journal entries; and reconciling balance sheet accounts, among other tasks that ensure that all financial transactions have been accounted for.
After completion of the month-end close, leaders and teams are better equipped with the information they need to identify trends, spot anomalies, and make decisions about the future. The month-end close serves as a foundation for financial analysis and ensures that a company stays accountable for its past, in addition to navigating toward a more informed and strategic future.
What Is a Month-End Close Checklist?
A month-end close checklist, which serves as a step-by-step guide to completing the close, helps optimize the process. A well-structured checklist will act as a roadmap. It will also ensure that no task gets overlooked or falls through the cracks, as well as facilitate communication among team members.
Among the benefits of a month-end close checklist are:
- It makes the close more manageable by breaking down the process into smaller tasks.
- It allocates time effectively and helps prevent delays in the month-end close by assigning deadlines.
- It tracks the status of each task so team members are aware of what needs to be done and what has already been completed.
- It adds a layer of accountability, allowing preparers and reviewers to take ownership of the accuracy and completeness of their work.
- It promotes consistency in the close process by providing a standardized list of tasks every month.
How to Create a Month-End Close Checklist
Creating a month-end close checklist requires a thorough understanding of the company’s accounting processes. Each accounting team should tailor the checklist to meet their needs, but the basic structure of the checklist will be similar across the board, regardless of industry.
1. Create a detailed list of tasks required to complete the month-end close.
Start by identifying the balance sheet and income statement accounts that affect the company’s financial statements. This exercise will help to narrow down the transactions that get recorded in these accounts. For instance, consider Accounts Payable. One critical component of Accounts Payable is to record all vendor invoices that are received. Another component of the account is to pay those invoices when they become due. Add these two tasks to the month-end close checklist to ensure that they don’t get overlooked.
For each task, include a description that outlines the specific action that needs to be taken to accomplish the task. Clear, concise instructions reduce ambiguity and help team members understand their responsibilities.
2. Sequence the tasks chronologically to reflect the flow of the month-end close, and prioritize the tasks that are critical and impact other teams.
Sequencing the tasks chronologically ensures each task is performed at the right stage. You don’t want to be reconciling a credit card statement before recording all the credit card transactions for the month.
In sequencing the tasks, take into consideration the tasks that are critical and time-sensitive, especially those that might impact other teams or external stakeholders. For instance, consider issuing invoices to customers as early as possible. Prioritizing the invoicing process is important because payment of those invoices relies on external stakeholders. The earlier customers receive invoices, the (hopefully) earlier they can process and submit payment for them.
3. Include workbook and journal entry references related to each task.
In order to review the transactions that get recorded in the accounting system, you likely need two pieces of information:
- A journal entry reference to look up the transaction
- Supporting documentation, such as workbooks and schedules
Including workbook and journal entry references in the checklist makes it easier for the team to track the transactions that get recorded. References serve as traceable links to supporting documentation that make the preparing and reviewing process more convenient. If all support is housed in Google Drive, consider linking to the documentation for easy access.
When it comes to supporting documentation, develop a standardized naming convention to easily reference workbooks and schedules. Figure out a naming convention that works best for your team and the filing system you use. Some teams might find it beneficial to start the file name with the accounting period by adapting the following format: YYYY-MM. This specific practice would help to maintain the records in chronological order when looking them up in the file directory.
4. Incorporate preparer and reviewer sign-offs.
Identify the preparer and reviewer for each task, and include columns for sign-off dates that team members can update once they complete the task. If you notice a task that’s complete, but missing a sign-off date, take advantage of the tagging feature in Google Sheets: Right-click the cell, click “Comment,” and use the @ symbol to tag the preparer or reviewer who is missing their sign-off date. This will generate an email to the team member that can serve as a reminder to complete the sign-off.
Adding sign-off dates not only helps to keep track of the status of the month-end close activity, but also is a best practice that encourages team members to stay accountable for their responsibilities.
5. Consider adding tax compliance requirements.
Adding tax compliance requirements to the month-end close checklist is optional, especially if your team already separately tracks tax deadlines. However, it can be helpful to include monthly and quarterly tax filings to ensure the team doesn’t miss any deadlines. For instance, sales and use tax returns. These are most likely monthly or quarterly filings that are submitted after (or during) the month-end close. Consider listing it as a task on the checklist to make sure it doesn’t slip through the cracks.
Download the Month-End Close Checklist Template
A month-end close checklist can help accounting teams elevate the close process, safeguarding against errors and improving time management. If you don’t already have a month-end close checklist, download our free template, which includes:
- A template for a month-end close checklist that includes all the key points mentioned above (and more)
- A detailed list of tasks commonly completed during the close so that you don’t have to build your checklist from scratch
- A status tracker and progress bar to easily see how far along your team is at completing the close