What tasks should be included in a month-end close checklist?

• Begin by reconciling bank accounts, credit cards, and other balance sheet accounts with regular activity. This step helps identify discrepancies early and establishes a reliable foundation for accurate financial statements.
• Next, record revenue and expense accruals. Capture earned but unbilled revenue, and recognize expenses incurred but not yet invoiced, such as utilities or professional services billed in arrears.
• If applicable, complete inventory adjustments. This includes physical counts, reviewing for obsolescence, and making any necessary cost adjustments. Then, calculate and apply depreciation to update fixed asset values.
• Post and review journal entries. Ensure all entries are properly coded. Many accounting teams have a second person review significant adjusting entries before they are finalized.
• Finally, prepare preliminary financial statements. Review for reasonableness, paying close attention to unusual variances or unexpected balances that might require further investigation.

How long should month-end close take for a small business?

Most small businesses complete month-end close in three to five business days with proper organization. The timeline depends on transaction volume, operational complexity, and how current the daily bookkeeping stays throughout the month. Companies maintaining current reconciliations and timely transaction recording typically close faster, focusing on analysis rather than catch-up work.

Business complexity significantly affects timing. A straightforward service business might close in two days, while companies with inventory or multiple locations could need a full week. The key is establishing realistic, consistent timelines month after month.

What's the proper order for month-end close procedures?

1. Begin with bank reconciliations.
This step comes first because it often reveals transactions that still need to be recorded or corrected. Items such as outstanding checks, deposits in transit, and bank fees can affect other accounts. Getting these reconciliations done early sets a clean foundation for the rest of the close process.

2. Revenue recognition and customer reconciliations.
At this stage, ensure all invoices are recorded, payments are applied accurately, and revenue accruals are made where necessary. These activities directly impact accounts receivable and should be handled promptly.

3. Expense accruals and vendor reconciliations.
Record any accrued expenses, make sure vendor invoices have been entered, and reconcile key vendor statements. This ensures your liabilities are accurate and up to date.

4. Inventory and fixed asset procedures, if applicable.
This includes physical inventory counts, adjustments for shrinkage or obsolescence, and fixed asset depreciation calculations. These steps can be time-consuming, so tackling them earlier in the schedule allows more flexibility.

5. Finish with journal entries and financial statement preparation.
Post any final journal entries once all adjustments have been made and reviewed. Then prepare and review the financial statements, checking for accuracy and investigating any unusual variances.

What are the most common month-end close mistakes to avoid?

Rushing through bank reconciliations is one of the most common mistakes in the month-end close process. It can create compounding errors that affect multiple accounts and distort financial results. Missing expense accruals is another frequent issue. Items like rent, utilities, and professional services are often overlooked, which leads to understated liabilities and misrepresented expenses. Reconciling items that remain unresolved month after month should be properly investigated instead of carried forward without explanation.

Improper cutoff procedures also cause timing errors that impact multiple reporting periods. Invoices for services scheduled for the following month or inventory received after the close date need to be carefully handled to ensure they are recorded in the correct period. Account coding errors often occur under deadline pressure. Transactions may be assigned to the wrong department or revenue category, which leads to reporting inaccuracies and complicates future analysis.

Finally, skipping the review of preliminary financial statements is a critical mistake. When teams are pressed for time, they may overlook unusual balances or variances that signal deeper issues. Taking the time to perform a thorough review before finalizing reports can prevent many of these problems and improve the overall quality of the close.