The monthly close process should be standardized. Start by creating a list of standard journal entries that will promote consistency in monthly closings.
The following types of adjusting entries produce accurate financial books — the basis for correct financial statements:
- Inventory counts to ensure accurate inventory levels on your books. It makes sense that inventory more prone to spoilage with a history of variances should be counted more frequently. Doing cycle inventory counts helps make sure that an adjusting entry reconciles the book value of the inventory to the true value determined during the inventory count.
- Standard journal entries. Adjusting entries made to the general ledger every month balances account variances. Any differences that exist between numbers can be caught and corrected before the period is closed. You need to document each entry. Therefore, preparing a list of all standard journal entries that need to be prepared during the month-end close ensures that all entries are posted to the general ledger.
The preparation of financial statements can begin only after all adjusting entries have been entered into the accounting system. Your accounting system probably generates financial statements, thus reducing the workload. But be sure to review the income statement and balance sheet.
Your company also generates a statement of cash flows and other data-rich reports that can be particularly useful. We not only can simplify your monthly close; but can also can analyze the information to help you run your company more efficiently and profitably.
Contact our office today. We will review your process with you and show you how we can turn mere numbers into long-term, helpful analytics.