What is Month End Reconciliation? Meaning & Definition

Your month-end process should include ways to automate as many tasks as possible to free your team to focus on the tasks they do best. This keeps your month-end close projects from error and, potentially, missing deadlines. Usually, the client task feature of your work management solution should help you create a list of tasks for your client so your team doesn’t waste valuable time chasing them. An effective month-end close process includes a system that collects and organizes data without delay or risk to data accuracy.

  • Automation is the key to reducing the time and effort required for the month-end closing process.
  • Even larger organizations struggle with fragmentation and coordinating company-wide financial work, as they are spread out across multiple geographic locations.
  • Cash basis is an accounting method that is based on the cash coming into and out of a business.
  • Needless to say that forecasting cash flow predictions accurately, making strategic business decisions, and financial planning, all depend on a successful financial closure.
  • There’s nothing harmful about outstanding checks/withdrawals or outstanding deposits/receipts, so long as you keep track of them.

BlackLine provides a happy medium between the two- once a reconciliation is complete, it is locked down and cannot be edited, so you know it’ll match the when the auditors ask for support . We’ve put together The Buyer’s Guide to Evaluating Expense Management Solutions. This is a great resource that explains why modern business expense apps are a game changer for companies looking to improve efficiency and accuracy. Give it a read and please don’t hesitate to reach out with questions. I think I can shed some more light as to why I was having the discrepancy. There is a separate book that is kept for record-keeping that was used for providing the beginning month and end of month balances to use in the system.

Importance of Closing Books Monthly

Don’t worry, just review your entries again to find the discrepancies. By reconciling financial data and statements, the finance team can promptly identify any non-compliance issues and take corrective actions. This prevents potential penalties or legal consequences and enhances the company’s reputation and credibility in the eyes of regulators, investors, and other stakeholders. Each item on the list is often done through a separate spreadsheet by isolated individuals specific to their departments.

By the end of the process, any discrepancies are addressed, and the financial records are aligned and accurate. Journal entries of recurring monthly transactions must be performed at the time of the month end close. This applies to such transactions as accrued expenses, amortization, depreciation, and loan interest.

Reconcile all accounts

The individual is reimbursed for the incorrect charges, the card is canceled, and the fraudulent activity stopped. If that’s true, then its income/expense, and what has been the historical history on fixing a reverse sign on revenue or expense (not misapplication of account). If that’s the case, then we need to ask how valid Net Income is…

When done the traditional way, these tasks are invisible to the wider finance function, and it can be difficult to integrate the work with the monthly closing process as a whole. A misplaced invoice or statement can result in curious losses that you won’t be able to account for. However, you can cut that down to as little as 5 days if your accounting team has access to automation software. These statements include your cash flow statement, balance sheets, and profit and loss statement. Your accounting system should have software that generates these reports automatically.

Dashboards and notifications additionally monitor the progress in real-time and give management an idea of what to do next. This level of visibility ensures that everyone is on the same page and that issues are spotted before they become significant problems. Don’t forget to review the revenue and expense accounts as well to make sure all entries have been accurately reflected. Ensure that the accounts payable balance, for instance, falls in line with the general ledger.

Final Review

Close the books 4x faster, collect over 95% of receipts on time, and get 100% visibility over company spending. Automated payment reconciliation, built-in employee debit cards, and seamless approvals can all be done using the power of Spendesk. Customers say that our software saves approximately 4 days’ worth of work at the end of each month. Following that, you can reconcile impairment definition the remaining balance of the banking transaction that occurred on July 1st using the aforementioned procedure. At this point, to match the payroll expense you entered in QuickBooks, we’ll need to locate the payroll expenses under the Find Match or Find Other Matches option. Doing this, QuickBooks will let you match the withdrawn partial funds by your payroll company.

Step 3: Identify Discrepancies

The Month End Reconciliation process comes with its fair share of time constraints and deadlines. As the month comes to a close, the finance team faces pressure to complete the reconciliation accurately and promptly. Month End Reconciliation is a crucial financial process that takes place at the end of each month to ensure the accuracy and integrity of a company’s financial records. Even though you must not sacrifice quality for speed, you must also plan ahead to meet your month-end financial reporting deadlines.

This is usually the starter balance on your statement and appears in most accounting software at the beginning of your statement. From employee payroll to budgets and expenses – your dollars in spending must match what is recorded in your books. As a business owner, your day is often filled with customers, orders, sales, and services needing your attention.

What is the month-end close process?

All fixed assets that a business might have, like equipment, technology, storage, housing, vehicles, etc., need to be assessed. It is also essential to consider that these assets depreciate, and the depreciation amount needs to be categorized under expenses. Automation software gives these teams awareness of financial activity throughout the firm, giving them a chance to provide input for purchasing decisions early on. Software easily records closing activities, who performed them, and what time, resulting in a convenient audit trail. Accounting professionals are able to verify that best practices are being followed and can trace back responsibility whenever mistakes are made.

This is because the automated system is designed to conduct reconciliation according to your desired frequency and standardises the process across your organisation. With all the moving pieces and time-sensitive data, automation software can help to lighten the manual load. Data automation tools like SolveXia collect data from various sources in seconds and match records. If an anomaly exists, SolveXia will notify its user on the spot so that it can be investigated and rectified.

An audit trail is your trusty companion here – it shows the path your transactions have taken, leaving no room for mystery. If you spot any discrepancies – like missing transactions or amounts that don’t match – it’s time to address them. These could be simple errors or signs of something more serious, like fraud. The big picture takeaway here is that the closing process costs you valuable time and energy which would be better spent on strategic decision making.

They look for any mismatches, missing entries, or errors that might have occurred during the month. Some businesses create a bank reconciliation statement to document that they regularly reconcile accounts. This document summarizes banking and business activity, reconciling an entity’s bank account with its financial records.

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