Do you often find yourself scrambling to do a month-end close — and then later reopening your books to fix a bunch of errors? If so, it's time to re-evaluate your approach.
It comes down to that old saying: If you can't find the time to do it right, how will you find the time to do it over? Fortunately, with commonly available software, and maybe the help of an outside professional, a solution is at hand.
Get on Schedule
The first step in streamlining your month-end close is to determine when each month begins and ends. This isn't a simple matter of looking at a calendar. In most small businesses, financial transactions are fluid and not easily confined to a specific timeframe. Maybe you pay for inventory in mid-March that you sell in mid-April, or vice versa.
It's important to implement the accrual method of accounting and be consistent in recording your financials. If you record revenue for one month but defer related expenses until the next month, you're asking for trouble. Establish a protocol and stick to it.
Don't Toss Your Apples in with Your Oranges
Improperly classified expenses can take many forms, depending on the nature of the business. Let's say you've got a construction firm with multiple projects underway. You order building materials for a site in North Southfield but the project manager mistakenly charges them to a project in South Northfield. Now your job costing reports will be off, and it could be a time-consuming, painstaking process for your accountant to figure out why during month-end close.
Get with the Programs
Many of the types of issues mentioned above can be resolved simply by using accounting software. Tallie, for example, offers automated credit card transaction management, which makes it much easier to track business expenses that you or your employees charge to the company each month. And if you haven't already switched from a manual accounts payable procedure to an automated service like Bill.com, you need to do it now.
Don't Wait Until the End of the Month
By definition, a month-end close can't happen until the end of the month. Still, there are habits you can develop each day to simplify the process and make it more accurate, including daily bank reconciliations. After all, if a banking error occurs on the first day of the month, it's much easier to sort it out immediately than to wait until the last day of the month.