Boost Your Efficiency with airSlate SignNow's Closing in Sales Process for Accounting and Tax

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hi my name is garrett watson and i'm a senior business development representative at flowcast prior to joining the flowcast team i spent the previous six years as a senior associate working in tax and audit today's video is all about the monthly close what it is and how to do it we'll give you an idea of how long the month in close process should take and recommend some resources to help make closing your books each month a little less overwhelming so what is the month enclosed process closing the books is part of following good accounting principles essentially it sets your numbers in stone by ensuring that nobody in your accounting department changes transactions from a previous month or even a previous year without you knowing about it including a monthly closing process in your regular accounting procedures ensures that your numbers are reliable stable and accurate the month end close involves verifying and adjusting your company's month end balances to ensure that your financial reports accurately reflect the businesses performance for the month so how do i complete the month end close each small business is unique so the specific tasks involved in closing the books vary from company to company but there are a few common activities such as recording daily operational transactions ideally you or your accounting software linked to your bank account are staying on top of bookkeeping and recording financial transactions as they happen rather than waiting until the end of the month but make sure you've accounted for all of sales and revenue transactions including cash expense transactions accounts receivable if you do extend credit to your customers and accounts payable if you purchase from suppliers on credit from there you'll record your monthly journal entries monthly journal entries are used to record unusual transactions that don't affect cash and aren't picked up by your accounting software's bank feed for example you might need to post a journal entry to record depreciation and amortization adjust a prepaid insurance account post accruals or recognize previously unearned revenue most accounting software can automate reoccurring adjusting entries for you then you're going to reconcile balance sheet accounts reconciling accounts ensures that all the transactions impacting an account are accurately reflected in your books you do this by matching your numbers to outside financial records such as bank statements credit card statements or loan statements a bank reconciliation is one of the easiest ways to spot missing or incorrect entries since cash is part of most transactions depending on your business you might also need to reconcile credit card transaction accounts payable accounts receivable payroll liabilities fixed assets prepaid expenses unearned revenue loans and lines of credit and other balance sheet accounts then you're going to review revenue and expense accounts finally review your revenue and expense accounts to ensure they're accurate you don't have to perform an in-depth reconciliation for your income statement accounts as you do for the balance sheet accounts but a quick review of the trial balance perhaps comparing the current month's numbers to the prior month or prior year to date can help you spot any glaring issues like a debit to a revenue account or misclassified expenses then you're going to start preparing your financial statements once you're satisfied that your general ledger is accurate you're ready to prepare financial statements that includes a balance sheet profit and loss statement and a statement of cash flows usually you can generate these statements right from your accounting system although some companies prefer to run reports and compile the numbers in an excel spreadsheet now give those financial statements to management to review having senior management review the financial statements is a critical part of your company's internal controls because the person reviewing the financial data and supporting documentation isn't part of the preparation process finally you're ready to close the month in your accounting software once management approves the financial statements you can close the month in your system most accounting software will handle the step for you when you check a box indicating you want to close the books closing the month prevents future transactions from being accidentally recorded in a prior period after the closing date so how long does the monthly close take in many businesses there's a lot of pressure to get the books closed as fast as possible ideally within a business week business owners and executives often use last month's financial information to make decisions for the next month so the sooner they get the numbers the sooner they can see what worked last month what didn't work and where they need to make changes going forward so what accounts need to be closed at the end of the month your month-end closing process will vary depending on the type of business you're in your chart of accounts and whether you use the cash or accrual method of accounting here's a list of some common accounts that need to be closed each month petty cash fund your checking and savings accounts accounts and notes receivable allowance for doubtful accounts prepaid expenses investments inventory fixed assets intangible assets accumulated depreciation and amortization accounts payable credit cards payable accrued payroll vacation pay and payroll taxes accrued property tax and sales tax deferred income taxes unearned revenue deposits bank loans and notes and equity accounts now let's review what we learned about month-end closing closing your books at the end of the month ensures that nobody in your accounting team inadvertently post transactions to a previous accounting period without you knowing about it this helps keep your financial reporting reliable stable and accurate your month-end close process involves ensuring you've accounted for all day-to-day transactions recording monthly journal entries reconciling all balance sheet accounts reviewing profit and loss statements for accuracy preparing financial statements having management review the financial statements and then finally physically closing the month in your accounting software and finally ideally you should be able to complete your monthly close process within seven business days automating certain elements of your close process makes hitting that deadline a lot easier if you need help streamlining your existing close process be sure to download our free month end close checklist we've included a link to the download below and hey if you found this video useful hit that like button and don't forget to subscribe that's all for today and good luck with your month and close