Month-End is the closing of all your processes which usually occurs on the last day of a calendar month. e.g. 30 November. The month being closed will remain open for up to seven additional business days in the next proceeding month so to process all prior month transactions. This will depend on the size of your business and on what day the last day of the calendar month occurred.
The month is officially closed when all of the month-end processes are completed to ensure all transactions are posted and will be reflected on reports.
Accounting procedures to be addressed so to have relevance to the Month-End are Revenues and Expenses, Assets and Liabilities.
- Entering all Supplier Invoices
- All Customer Payments processed and the sending out of Statements (Sending out Statements often has a positive effect on getting paid by customers quicker)
- Banking of all cash receipts
- Processing of all cash payments and Point of Sales (POS)
- Reconciliation of all Bank and Credit Card Trading Accounts
- Aged Receivables reconciled
- Aged Payables reconciled
- Payroll data processed
- Any Journals that need to be performed
- Entering new Fixed Assets
- Depreciation of Fixed Assets
- Entering of new Loans
- If you have inventory, the month-end will be more challenging
Why is it important?
Once confident that all the processing and transactions have been performed for Month-end close will enable the generating for the relevant period a Profit & Loss Statement with a layout as such that gives and finalises a snapshot of transactional activity for the period allowing for good quality information to be produced for better decision making.
By reviewing and checking it month by month keeps your finger on the pulse as it will point out unusual discrepancies to help you identify wasteful expenditures. It will also show how much revenue the business took and how much money was spent to obtain that revenue.
Studying the Month End Profit & Loss can also help (hate to say it) dishonest employees. This is particularly noticeable in the Hospitality Industry where the theft of food products is quite common.
The Profit & Loss Statement shows the business’s Net Income or Losses on the bottom line. Remember, there are only 12 months in the year the more months you can ‘win’ the better. Finding out at the end of the year that you missed the mark is not ideal.
Knowing how to read your Profit & Loss each month gives you a clear picture of the financial position of your business and it is something any Lender or gives a potential Investor in your business a certain understanding of your financial position.
Unfortunately, many a business has failed due to the lack of not recognising important elements in their business and by not keeping accurate records.
At Accountant Ready Books our professional bookkeeping service teaches our clients how to make sense of the reports we give them for in today’s economic climate they need to be provided with the financial information quickly and efficiently to maintain effective control.
Call us today 1300 729 311 your local Bookkeeper Gold Coast
