(This article was last updated on 01 November 2024.)
If you're finding that your month-end reporting process is a mess of spreadsheets, late nights, and constant stress, you're not alone.
Many finance professionals grapple with time-consuming closes, discrepancies in financial statements, and the pressure to provide accurate data quickly.
The good news? It doesn't have to be this way.
In this guide, we'll dive into practical steps to transform your month-end close.
From adjusting your ledger accurately to leveraging tools like expense management software, we'll address common challenges and offer solutions to make your financial reporting smoother and more efficient.
What is Month-End Closing and Reporting?
Put simply, month-end closing is the process where your finance team closes the books at the end of each month.
This allows you to review transactions, journals, and financial reports more frequently, keeping your accounting statements accurate and up-to-date.
Essentially, it provides a clear picture of your company's financial health and helps in efficient financial management.
While the year-end close is the most critical period for all businesses, practising efficient financial management regularly is crucial.
By performing a monthly close, you can catch and address financial discrepancies early, ensuring your business remains on solid financial footing.
Adjusting Your Ledger
During the month-end report, your ledger is adjusted for monthly transactions.
This involves:
Documenting loan payments: Recording all loan repayments made during the month to keep your liabilities current.
Accounting for depreciation: Adjusting the value of your company assets to reflect depreciation, ensuring asset values are accurate.
Eliminating bad debts: Writing off any debts that are unlikely to be collected, which cleans up your accounts receivable.
Recording prepaid expenses: Making entries for costs that have been paid in advance but pertain to future periods.
Reviewing the Previous Month's Transactions
Another purpose of the month-end report is to review the previous month's transactions to ensure everything has been accurately recorded.
This step includes:
Verifying entries: Checking that all financial transactions have been entered correctly into your accounting system.
Reconciling accounts: Ensuring that your bank statements match your internal records.
Identifying discrepancies: Spotting and correcting any accounting mistakes or irregularities.
If your accounts don't balance, the month-end report provides an opportunity to fix these issues promptly, preventing them from escalating into larger problems.
Benefits of Month-End Reporting
Regular month-end reporting offers numerous advantages that help your business stay financially compliant and healthy.
By implementing a consistent month-end close process, you can ensure accurate financial records and make informed decisions.
Here's why month-end reporting is important:
1. Accurate Financial Statements
Month-end reporting generates precise balance sheets and income statements, which are essential for understanding your business's financial situation.
By reconciling your company's earnings against its outgoing costs each month, you gain a clear and up-to-date picture of your financial health.
2. Enhanced Compliance
Regular month-end closes ensure compliance with both internal policies and external regulatory standards.
Companies that perform consistent month-end reporting are better positioned to meet financial regulations and avoid penalties.
3. Early Detection of Discrepancies
Month-end reporting enables essential monitoring of internal finances to swiftly spot inconsistencies.
Whether you notice a sudden increase in supplier prices or identify more serious issues like fraud, regular reviews help you address problems before they escalate.
4. Informed Decision-Making
Having up-to-date financial data allows management to make informed strategic decisions.
When you know exactly where your business stands financially, you can plan effectively for the future, allocate resources wisely, and identify growth opportunities.
5. Improved Financial Planning
Consistent month-end reporting provides a solid foundation for accurate financial forecasting and budgeting.
By analysing monthly financial trends, you can predict future financial needs and adjust your strategies accordingly.
Who Creates and Reads Financial Month-End Reports?
Typically, your company's finance or accounting team undertakes the month-end close process and creates these essential reports.
The Chief Financial Officer (CFO) often plays a significant role in overseeing this procedure to ensure accuracy and compliance.
Once the month-end reports are prepared, they are read by the executive management team.
These reports help them determine how the company is progressing financially and in which direction it's headed. Having up-to-date financial information is crucial for making informed strategic decisions.
Keep Month-End Reports Concise
When it comes to month-end reporting, less is more. You should aim to keep the reports concise yet informative.
Here's how:
Focus on key metrics: Include the most crucial information that impacts business decisions.
Avoid unnecessary details: Exclude data that doesn't add value to the report's purpose.
Use clear formatting: Utilise bullet points, charts, and graphs to make data easily digestible.
By keeping your month-end reports streamlined, you ensure that the management team can quickly grasp the company's financial status without spending an entire day sifting through complex documents.
What Should Be Included in a Month-End Financial Report?
While every organisation is unique - and what works for a large corporation may not suit a small business - there are key components that are essential for an effective month-end reporting process.
Here's a list of the important elements you should include:
Total revenues: Summarise all income generated during the month to understand your earnings.
Bank account details: Provide statements and reconciliations of all company bank accounts to ensure accuracy.
Inventory levels: Record current stock levels to manage supply chain and production needs.
Petty cash fund amounts: Account for small cash expenses to track minor expenditures.
Balance sheets: Present a snapshot of your company's financial position at month-end.
Financial statements: Include income statements and cash flow statements for comprehensive financial analysis.
Total fixed assets: Detail assets like property and equipment to assess long-term investments.
Income and expenses information: Break down all income sources and expenditures to monitor profitability.
General ledger data: Compile all journal entries and financial transactions for complete transparency.
Including these components in your month-end financial report will give you a thorough overview of your company's financial health.
For more information on how expense management software can transform your month-end reporting process, book a free demo with ExpenseIn today.
The Step-by-Step Month-End Reporting Process
The month-end reporting process involves four key steps that help you streamline your financial close and ensure accurate financial statements.
These steps are:
Recording revenues and expenses
Closing by reconciling company accounts
Analysing the figures with stakeholders
Reporting to management
Let's explore each step in detail.
1. Recording Revenues and Expenses
The first step in your month-end closing process is to record all financial transactions accurately.
Here's what you need to do:
Enter all transactions: Check that all revenue and expense activities have been entered into your Enterprise Resource Planning (ERP) software. This includes sales, purchases, expense receipts, and payments.
Record accrued liabilities: Make sure to record payroll, employee vacation time, interest expenses on notes payable, taxes, and any other accrued liabilities.
Verify fixed assets: Conduct an inventory count and verify your fixed assets to ensure they are accurately recorded and valued.
Create journal entries: Prepare depreciation and amortisation journal entries to account for the decrease in value of your assets over time.
2. Closing by Reconciling Company Accounts
The second step is to close your accounts by reconciling them:
Reconcile accounts: Reconcile your corporate credit card accounts, checking and savings accounts, petty cash fund, and prepaid accounts. Ensure that the balances match between your records and bank statements.
Intercompany accounts: If applicable, verify the consistency of payables and receivables by reconciling intercompany accounts.
3. Analysing the Figures with Stakeholders
In this step, you analyse the financial data and collaborate with stakeholders:
Prepare financial statements: Draft an adjusted trial balance, income statement, balance sheet, and ageing reports for accounts payable and receivable.
Stakeholder review: Review the analysis with relevant stakeholders to identify any discrepancies or areas of concern.
4. Reporting to Management
The final step is to report your findings:
Prepare reports: Create management reports, financial planning and analysis (FP&A) documents, and any required external reports.
Audit preparation: Assemble the necessary information for internal and external auditors to ensure compliance and readiness for audits.
How Long Should the Month-End Closing Take?
Typically, it takes between 5 and 10 days, depending on the complexity of your company's finances and the efficiency of your accounting team.
A Sage Intacct poll revealed that 93% of accounting and finance professionals feel pressured to close the books faster, and over 60% believe that a smoother month-end close would allow them to focus more on strategic initiatives.
Streamlining your processes and utilising efficient tools can help reduce this timeframe.
In fact, implementing automation in the month-end close process can reduce the closing time by up to 30%.
Need help optimising your month-end closing process? Book a demo to learn how ExpenseIn can make your financial operations more efficient.
How to Streamline Your Month-End Reporting Process: Top 3 Tips
As you've already learned, month-end reporting is a vital process within any business. However, it's also one that can be improved for maximum efficiency.
Here are our top three tips to help you streamline your month-end close and save valuable time:
1. Backup Your Important Data
In this day and age, it's essential to switch from paper-based accounting methods to digital and online systems.
If you haven't made this digital transformation yet, check out our finance digital transformation guide to get started.
Even if you're already using online or digital accounting software, it's crucial to back up all your documentation.
Losing access to important data, reports, and analyses can prolong the entire month-end close procedure and negatively impact other accounting operations.
To prevent this, back up your financial data using a dependable cloud-based solution that keeps your information secure.
2. Meet with Your Team
Before starting the month-end close, bring your team together for a pre-close meeting to go over the schedule and deadlines. Make sure everyone is aware of their responsibilities and tasks.
This is also an excellent opportunity to address any challenges that occurred during last month's closing and devise a plan to avoid them this time around.
3. Utilise Helpful Software
Take advantage of third-party tools and software to automate as much of the month-end close process as possible.
Many time-consuming and manual month-end closing procedures can be streamlined using technology. Tools that assist with collecting relevant data for your month-end reporting are invaluable.
Business expense tracker apps are one such example that can significantly reduce workload and increase accuracy.
Ready to streamline your month-end closing? Book a free demo with ExpenseIn and see for yourself how easy month-end reporting can be.
How ExpenseIn Can Streamline Your Month-End Reporting
Are you looking to simplify your month-end reporting process once and for all?
ExpenseIn is a cloud-based expense management system that keeps all your company's expense information in a single, secure, and easily accessible location.
It allows you to access and utilise real-time expense reports, enabling you to make smarter decisions - something invaluable during month-end reporting.
With ExpenseIn, you can:
Automate expense tracking: Save time by automating the collection and categorisation of expenses.
Access real-time reporting: Get up-to-date financial data to make informed decisions quickly.
Streamline approvals: Simplify the approval process with customisable workflows.
Ensure compliance: Maintain compliance with internal policies and external regulations.
Ready to Simplify Your Month-End Close?
We get it—month-end reporting can feel like a never-ending cycle of spreadsheets, late nights, and constant stress. But it doesn't have to be this way.
By streamlining your processes and leveraging tools like ExpenseIn, you can make your financial close smoother, more accurate, and far less time-consuming.
Why wait? Book a free demo with ExpenseIn today, and discover how effortless month-end reporting can be!
