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Closing the books regularly is important to your company’s financial health and performance. Even if you are only required to do so yearly, you may find that recording and reconciling the accounts for a one-year period is an absolute nightmare.

A monthly close process is highly recommended to ensure accuracy and transparency. In fact, depending on your company’s size and business cadence, you may need to close the books weekly or even daily.

In this article, you will learn about the month-end close process and its benefits. You will also learn the steps involved, as well as best practices, and get a helpful month-end close checklist. Finally, you will learn how Layer and Google Sheets can help you to standardize and automate your procedures.

What is the Month-End Close?

The month-end close is an accounting process in which all financial transactions for the month are accounted for and accurately recorded. All transactions must take place fully before or after the closing date to ensure accurate financial reporting. The process formalizes and fixes the company’s activity for that month.

Month-end closing and reporting help avoid changes being made to past records - accidentally or otherwise - and can help you identify discrepancies and potential issues more quickly. There are many additional benefits, such as:

  • Increase reliability and transparency: Closing the books yearly can lead to mistakes and omissions, which can lead to all sorts of problems, including legal ones.
  • Measure progress: Month-end reporting allows you to set long-term goals and measure monthly progress.
  • Facilitate auditing and filing taxes: There are some financial procedures that are not optional, like filing taxes or doing audits. Month-end closing and reporting will save you time, effort, and stress when audit or tax time comes around.
  • Improve financial planning: By making sure your accounts are balanced monthly, you will have a more accurate and updated view of your company’s finances. This leads to more informed decisions and better financial planning.

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How Do You Perform A Month-End Close?

Exactly how the month-end close process is carried out depends on the company, of course, but some steps are common to all. Ideally, the first step is to facilitate collecting and recording data as needed without waiting until the end of the month to start collecting receipts, invoices, bank statements, etc.

Accounts receivable

The first step is to record all income received during the month, including invoices, cash, or loans. You will need to check that the correct amount has been received and take care of any unpaid invoices. Once verified, each transaction should be recorded as a journal entry.

Accounts payable

You also need to record all expenses for the month, including all purchases and bills. Like with accounts payable, all transactions must be verified using the relevant documents - like expense reports and card statements. Once verified, each transaction should be recorded as a separate journal entry.

Account reconciliation

This is an important step, as it involves cross-checking your account statements with receipts, bank statements, and any other external documents. In other words, you need to match and verify all transactions to the relevant bank, business, or vendor.

Fixed assets

Remember to consider any fixed assets, like property or expensive equipment. Due to depreciation and amortization, these assets are translated into cash on your ledger to reflect the drop in value over time. Since these assets are expensive, it’s possible to distribute the cost of depreciation as expenses over a number of years.

Final statements and reporting

Once you have completed the previous steps, it’s time to prepare the required financial statements and reports. These will vary depending on different factors but tend to include summaries of the general ledger, balance sheets, and profit/loss statements. Check out our related articles to learn more about profitability analysis and cost-volume profit analysis.

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Month-End Close Best Practices

The specific accounting practices will depend on the requirements of your industry and the countries where you operate. However, there are some general best practices that are applicable to all, and one general recommendation: automate whatever you can. Fortunately, the process is highly structured, and tools like Layer and Google Sheets can help you automate most of it.

Be inclusive

Although the month-end closing and reporting process is a financial one, that doesn’t mean it’s only the finance team’s business. By involving other teams and explaining the importance of this process, you can improve the data collection phase considerably.

Set clear tasks

Every member of the team needs to be clear on the tasks and responsibilities of their role. In order to do this, you first need to identify all the tasks that need to be completed. Once you’ve done this, Google Sheets and Layer can help you set up automatic data flows to and from specific users, assign permissions and monitor progress.

Prioritize accuracy

There’s no getting around the fact that these procedures take time and effort, and you need to continue day-to-day operations at the same time. The pressure of deadlines can result in the prioritization of speed over accuracy, which is a situation you don’t want arising. By automating repetitive tasks and setting up automatic checks, you can free up your team to focus on accuracy.

Gather feedback

Take advantage of the fact that this is a monthly process to collect feedback from the people involved in the process. Make a note of comments or issues related to the different steps involved and use this to optimize the process.

Month-End Close Checklist

The checklist below can be customized to include specific items within each point:

  • Set and communicate deadlines
  • Record all income
  • Record all expenses
  • Reconcile accounts
  • Consider fixed assets
  • Draft financial statements
  • Review and report

Automate Month-End Procedures with Layer and Sheets

There is no doubt that month-end closing and reporting procedures can greatly benefit your company’s finances. Still, there is also no doubt that it can be a time-consuming and exasperating process when done manually - especially if you leave it all to the last moment. Fortunately, many of the tedious, repetitive tasks can be automated for improved efficiency and reliability.

Using Google Sheets and Layer, you can set up data collection forms and use templates for different types of financial documents you need. You can download a Balance Sheet template and assign and monitor tasks, set up automatic updates, and share customized reports with different user groups.

How to automate your FP&A on top of Google Sheets?

Layer is an add-on that equips finance teams with the tools to increase efficiency and data quality in their FP&A processes on top of Google Sheets. Share parts of your Google Sheets, monitor, review and approve changes, and sync data from different sources – all within seconds. See how it works.

Using Layer, you can:

  • Share & Collaborate: Automate your data collection and validation through user controls.
  • Automate & Schedule: Schedule recurring data collection and distribution tasks.
  • Integrate & Sync: Connect to your tech stack and sync all your data in one place.
  • Visualize & Report: Generate and share reports with real-time data and actionable decisions.

Limited Time Offer: Install the Layer Google Sheets Add-On today and Get Free Access to all the paid features, so you can start managing, automating, and scaling your FP&A processes on top of Google Sheets!

Conclusion

The month-end close process provides many benefits, including more accurate and transparent financial reporting, better insights, and financial planning. Not to mention the time and effort saved on audits and filing taxes.

By using Layer and Google Sheets, you can quickly connect your team, assign permissions and responsibilities, automate repetitive tasks - which are likely to lead to errors if done manually - and monitor every aspect of the month-end closing and reporting procedures.

You now know about the month-end close process and its role in the health and performance of your company’s finances. You should understand the best practices for a month-end close process, as well as how Layer and Google Sheets can help. We recommend using the Month-End procedure checklist above to make sure you don’t miss anything.

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Maria Del-Olmo
Originally published Sep 29 2022, Updated Nov 11 2022