Companies that adhere to month-end book closing practice vary from mid-size businesses to large corporate multi-tax ID bodies. Regardless of the size of your organization, the month-end book closing can be critical to ensuring that you maintain accurate and consistent financial records throughout the fiscal year.
As the name suggests, this process involves “closing the books” to accounting transactions at the end of a calendar month. This gives you a clear picture of all of the month’s activities including the revenue and losses. If you want to make sure the top management has all the vital financial information they need to make key decisions, closing the books at month-end is non-negotiable.
Large Organizations Need to Employ Month-End Book Closing
When you are a multi-million dollar organization with multiple employees, it’s easy to lose sight of financial transactions. Think of month-end closing as a useful opportunity to stop and take inventory of how the company is really doing.
The month-end closing is when your accounting department reviews, records, reconciles, and reports on your month’s sales orders, purchase orders, revenue, inventory, assets, cash, and bank accounts. This process locks down crucial financial data which means:
· You can’t add data and fall behind on your records, and
· The accuracy and integrity of your financial data is protected
Benefits of Month-End Book Closing
Going through all your financial records every single month can be frustrating. However, there’s something that can be even more frustrating: having to re-build your reports, re-file your taxes, and explain to the IRS why you underreported your company profits.
Small as well as large companies know exactly how one single minor error in their books can lead to a major headache.
Here are some of the key benefits of month-end book closing:
Accuracy
It is much easier to keep track of your books on a monthly basis than it would be at the year’s end because your data is divided into smaller chunks. A missing transaction or a duplicate record doesn’t pose the same level of threat when it is detected and rectified early.
According to the Wall Street Journal, when these small errors are not caught early, they can lead to significant repercussions, for example:
· An error in calculating tax assets led Camping World to overstate their losses by $47 million
· An error in calculating revenue led Seneca to understate their revenue by $16.5 million
Simplified Tax Filing
With month-end closing, your financial data is accurate, complete, organized, and accessible. Whether you need data from March 2020 or September 2001, it is easy to find, making tax filing and auditing a breeze.
Improved Decision Making
Many organizations prefer month-end book closing because it allows them to make more informed decisions in the future. When you can see patterns and trends month-over-month, you can predict changes in revenue or the market with more accuracy.
Remote Accounting Online Can Make Month-End Book Closing Effortless
We understand that sometimes bookkeeping can be put on the back burner when there are so many crucial tasks on your plate. One month can easily turn into two or more, and then one day you realize your finances haven’t been recorded for an entire year.
This is where we come in. At Remote Accounting Online, our team of experienced bookkeepers and accountants can help with record-keeping, month-end book closing, consulting, data clean up, and more. To learn more about our services, give us a call at 541-772-5555 or leave a message here.