The month-end close is a pain point for many small to midsize businesses. While internal accounting teams often aim to wrap up the close within three days, a recent survey found that half the respondents actually take six days or longer to close the books. What can your organization do to help streamline this process? Leveraging cloud-based technology tools like QuickBooks® can be a game changer.

Why closing the books matters

Closing the books — the process of finalizing all accounting records for a specific period — is more than a compliance chore. It provides insight into a company’s financial health by ensuring assets and liabilities are accurately posted, revenue and expenses are matched in the right periods, and any errors are quickly caught and corrected. A consistent, timely closing process can provide reliable data for:

• Tracking profitability by product or department,
• Maintaining cash flow visibility,
• Budgeting and strategic planning,
• Preparing tax returns and financial statements, and
• Strengthening internal controls and preventing fraud.

Conversely, delays in closing the books can result in operational inefficiencies, misinformed business decisions, and overlooked growth opportunities.

Best practices for QuickBooks users

Using QuickBooks’ features, you can speed up the closing process without compromising financial reporting quality. Establishing a structured, repeatable workflow is key. Rather than improvising each month, create a standardized closing checklist that includes these nine steps:

1. Reconcile bank and credit card accounts. Every reliable close begins with accurate account reconciliations to help prevent duplicate, missing and fraudulent transactions. However, this step can be time consuming and frustrating, especially for businesses with significant transaction volume. QuickBooks can streamline reconciliation by importing and categorizing transactions automatically through its bank feed feature. Configuring bank rules further reduces manual coding and improves consistency.
2. Review open receivables and payables. Unpaid invoices and overdue bills distort cash flows, profitability, and amounts reported on your balance sheet. QuickBooks can generate aging summaries for accounts receivable and accounts payable. Review the receivables summary for overdue invoices, then follow up with customers and determine whether any accounts are uncollectible. Similarly, scrutinize the payables summary to verify all bills have been received and posted, and check for duplicate entries. Understanding what you owe and when helps maintain strong supplier relationships and avoids surprises in future periods.
3. Conduct physical inventory counts. For businesses with inventory, errors in stock levels can lead to misstatements in the cost of goods sold and gross profits. Performing a physical inventory count at month end — and reconciling it to QuickBooks data — is a best practice that ensures inventory valuation remains accurate. QuickBooks’ built-in inventory tools or integrations with third-party platforms can provide real-time visibility into stock levels and streamline this process.
4. Record fixed assets and depreciation. Any major purchases made during the month that qualify as fixed assets — such as equipment, furniture, vehicles, and leasehold improvements — must be capitalized on the balance sheet, not immediately expensed on the income statement. Set up depreciation schedules based on the acquired assets’ useful lives. Also, remove any sold or retired assets from the books. While QuickBooks doesn’t automate depreciation, you can track depreciation schedules in spreadsheets or integrate third-party tools.
5. Post prepaid expenses and accruals. Accrual accounting requires that revenue and expenses be recorded when earned or incurred, not when cash changes hands. This requires journal entries for prepaid assets and accrued expenses. QuickBooks allows you to create custom journal entries and automate recurring items to reduce manual effort. Recording these entries monthly helps produce a more accurate, complete picture of the business’s interim financial performance.
6. Verify payroll and benefits. Even when using a third-party payroll provider, it’s essential to reconcile payroll-related entries each month. This includes verifying gross wages, employer-paid taxes and benefit contributions. QuickBooks Payroll can automate much of this process, but comparing payroll reports to general ledger entries is prudent to confirm accuracy and catch any inconsistencies early.
7. Analyze preliminary financial reports. With QuickBooks, you can quickly run a preliminary profit and loss statement, balance sheet, and statement of cash flows. Compare these reports to prior periods, internal budgets or forecasts, and/or industry benchmarks to identify anomalies. Investigate unusual fluctuations for coding errors, missing transactions, or unexpected balances, then make any necessary corrections. Keeping up with adjusting entries every month facilitates year-end financial reporting and tax preparation.
8. Lock the books. Once you’ve made all necessary adjustments and entries, QuickBooks allows you to “close the books” with a password to prevent changes after the period ends. This functionality, accessed through the settings menu, prevents backdating or editing past transactions, thereby maintaining the integrity of finalized records.
9. Document the closing process. The final element of a well-run close is documentation. Save the month-end checklist, supporting reconciliations, journal entries and exception notes in a shared folder or attach them directly to QuickBooks transactions. This adds transparency and ensures continuity if there’s turnover in your accounting department.

Crossing the finish line with confidence

The month-end close doesn’t have to be a source of stress. By leveraging QuickBooks’ functionality and implementing a structured closing process, your business can significantly reduce the time and effort required to close the books while improving accuracy and insight. Contact us to help set up efficient, reliable closing procedures for your business.

• Category: Business, Specialized Services