Financial statements are one of the most important strategic tools for any business. They assist companies in measuring progress toward key objectives and are crucial for producing an accurate cash flow forecast to make the most informed business decisions.
In order to reap the most success from your financial statements, however, you must get into the habit of regularly closing your books with month-end reporting.
If you’ve ever wondered, “what are month-end reports?”, don’t fret. In this guide, we’ll teach you everything you need to know about the month-end reporting process.
Table of Contents
- What is Month-End Closing and Reporting?
- What are the Benefits of Month-End Reporting?
- Who Creates Financial Month-End Reports and Who Reads it?
- What Should be Included in a Month-End Financial Report?
- The Step-by-Step Month-End Reporting Process
- Tips for Greater Efficiency During Month-End Reporting
- How ExpenseIn Can Help with Your Month-End Reporting
What is Month-End Closing and Reporting?
Put simply, month-end closing and reporting is where a finance team closes the books at the end of each month, enabling them to review transactions, journals and reports more often. This process allows a business to keep accounting statements accurate and up-to-date.
For all businesses, the most critical closing period is at the end of the financial year. However, efficient financial management is something that should be practiced as regularly as possible.
Adjusting your ledger
Your ledger is also adjusted for monthly transactions by the month-end report. This involves documenting loan payments, taking depreciation into account when valuing firm assets, eliminating any bad debts, and making entries for prepaid costs.
Reviewing the previous month's transactions
Reviewing the previous month's transactions to ensure that everything has been accurately recorded is another purpose for the month-end report. If your accounts don't balance, the month-end report gives you an opportunity to fix any accounting mistakes.
What are the Benefits of Month-End Reporting?
Month-end reporting generates accurate balance sheets, which are the best strategy for understanding a business's financial situation. When performed consistently each month, your company's earnings will be precisely reconciled compared to its outgoing costs.
In addition to precise reconciliation of your company's earnings and spending, month-end reporting assures an organisation's compliance with both internal and external regulatory and financial standards.
Additionally, it enables the essential monitoring of internal finances to swiftly spot inconsistencies, such when a supplier has suddenly raised its prices or more serious matters such as fraud.
Who Creates Financial Month-End Reports and Who Reads it?
A company’s finance or accounting team are responsible for undertaking the month-end close process, as well as creating the financial month-end reports. The CFO, or Chief Financial Officer, may also play a large role in this procedure.
The month-end report is then read by the executive team to determine how the company is progressing financially, as well as in what direction it is headed.
Keep month-end reports concise
Generally speaking, the report should be concise so that the management team doesn't have to spend a whole day reading it, yet informative enough to include the most crucial information for making important business decisions.
What Should be Included in a Month-End Financial Report?
Every organisation is different, and what works for a large company may not work for a small business. However, in general, you'll need the following components to complete a month-end report:
Total revenues
Bank account details
Inventory levels
Amount in the petty cash fund
Balance sheets
Financial statements
Total fixed assets
Income and expenses information
General ledger data
The Step-by-Step Month-End Reporting Process
The month-end reporting process includes four steps:
Recording revenues and expenses
Closing by reconciling company accounts
Analysing the figures with stakeholders
Reporting to management
We’ve described each step in more detail below.
1. Record
Check that all revenue and expense activities have been entered into the enterprise resource planning (ERP) software
Record payroll, employee vacation, notes payable interest expenditure, taxes, and any other accrued liabilities
Check fixed assets and do an inventory count
Create depreciation and amortisation journal entries
2. Close
Reconcile your corporate credit card accounts, checking and savings accounts, petty cash fund, and prepaid accounts
Verify the consistency of both companies' payables and receivables by reconciling intercompany accounts
3. Analyse
Draft an adjusted trial balance, an income statement, a balance sheet, and aging reports for accounts receivable and payable
Go over the analysis with relevant stakeholders
4. Report
Prepare management, financial planning and analysis, and external reports
Assemble the necessary information for in-company and outside auditors
This month-end procedure might take between 5 and 10 days, depending on the efficiency of your accounting team.
Tips for Greater Efficiency During Month-End Reporting
As you’ve already learned, month-end reporting is a vital process within any business. However, it’s also one which can be streamlined for maximum efficiency. Here are our top 3 tips to help you achieve this.
1. Back Up Your Important Data
By now, all businesses should have switched their paper-based accounting methods to digital and online ones. If you haven’t already made the digital transformation in your business, we run you through the process in this blog post.
Even if you already use online or digital accounting software, it's crucial to back up all of your documentation. Besides, no one wants to lose access to their important data, reporting, and analysis. If this were to happen, it would prolong the entire month-end procedure and have a domino effect on other accounting operations. Therefore, back up your financial data using a dependable cloud-based solution that will also keep it secure.
2. Meet with Your Team
Bring your team together for a pre-close meeting to go over your schedule and deadline. Make sure everyone is aware of the tasks they'll be responsible for. This is also an excellent opportunity to address any challenges that occurred at last month's closing and, if necessary, devise a plan for avoiding them.
3. Utilise Helpful Software
You should also use third-party tools and software to automate the process as much as you can. Many of the time-consuming and manual month-end closing procedures can be streamlined using technology. Therefore, take advantage of tools that assist with collecting any of the relevant data for your month-end reporting. Expense management software is one such example.
How ExpenseIn Can Help with Your Month-End Reporting
Cloud-based expense management software, like ExpenseIn, keeps all of your company’s expense information in a single, secure, and easily accessible location. It also allows you to access and utilise real-time expense reports to make smarter decisions – something which is invaluable come month-end reporting.
