A Guide to Month End Accounting
Handling your company’s finances requires a good amount of analysis and bookkeeping. One area that factors into your accounting processes is your month-end accounts. To help you understand what your month-end accounts are and why they’re important for your business, this article will offer a breakdown of what they’re used for.
What are month-end accounts?
Month end accounts contain the information on all financial transactions conducted within the last month. These accounts are completed at the end of a month-long period to get all of that information in order so businesses can review transactions and amend anything that does not seem accurate. Then, these accounts can be filed away and the next month-long accounting period begins.
Why are month-end accounts important?
Month end accounts are important because they help a business keep track of finances in twelve isolated accounting collections. This makes it much easier to comb through a multitude of transactions, as opposed to reviewing an entire year’s worth at once. By completing accounts in month-long bursts, work is much more manageable for the accountants.
It’s also important to conduct a thorough review of each month’s finances to ensure that nothing has been missed or incorrectly noted down, which would interfere with the next month’s finances. For example, if a large expense is planned for July but transactions from June have been incorrectly written down, there may not be enough money left to cover it. Combing through every transaction tells a company exactly how much they have spent and how much they have left going into the next month.
What processes are involved in the month-end close?
The month-end close is not as simple as just checking over the previous month’s financial transactions, it is a complex process consisting of several accounting procedures. Most commonly, it can be broken down into four steps:
- Collect the month’s financial accounts: The finance and accounting team will have access to all of the information regarding a business’ monthly transactions, including income, expenses, petty cash and savings.
- Review and reconcile: Each individual transaction then needs to be thoroughly reviewed. Accountants must ensure that the accounts balance, that everything has been accurately recorded and management has been informed.
- Create financial statements: The finance team is then tasked with creating important financial statements, such as the balance sheet, the cash flow statement and the income statement.
- Conduct a final review: Once the accountants have finished their work, a higher-up will conduct a final review of the financial statements to check that everything lines up.
What needs to be completed before the month-end close?
Before the month-end close, a business needs to have its monthly financial affairs in order. Typically, the finance and accounting team will create a month end close checklist of financial data that needs to be completed.
This list will include:
- Reconciling bank accounts.
- Balancing income and expenses.
- Recording petty cash.
- Ensuring all undeposited funds have cleared.
- Paying off any due balances in your accounts payable ledger.
- Adjusting outstanding deposits.
- Writing off any obsolete inventory.
Top tips for a successful month-end closedown
With such a complex process to work through, here are some top tips to help ensure a successful month-end close:
- Manage time effectively: A month end close can be time consuming, so it is important to manage time and designate tasks effectively, in order to meet deadlines.
- Arrange the accounts in advance: Financial information will likely be spread across the company, so it’s essential that the accountants arrange to receive all of the necessary information before the month’s end.
- Take the time for accuracy: Accuracy is key, so it’s important not to rush when closing the books. If mistakes are made, it could mess up the company’s finances for the rest of the year. An accurate month-end close is a successful month-end close.
Getting Your Month End Accounts Right
By completing your month end accounts accurately and in good time, you’ll not only have better visibility of your businesses finances, you’ll also ensure year end accounts are more manageable.
To make sure this happens, it’s wise to get an accountant involved in the process. They have expertise and experience in completing these sorts of financial tasks, and can help and advise you to ensure a successful month end close process and subsequent year end close.
We offer a wide range of services to help businesses in all aspects of their financial operations including;
- Business Plans.
- Year End Accounts.
- Self-Assessment Returns.
- Capital Gains Tax.
- Company and Corporation Tax.
- Companies House Confirmation Statements.
- Companies House Annual Accounts Submissions.
- Landlords Tax.
Wigan, WN1 2AD