7 steps to close your books every month

Maintaining accurate financial records is crucial for any business. One essential aspect of this is the monthly book closing process. In this blog post, we will outline a 7-step checklist to help you close your books efficiently and effectively.

#1 Categorize all your transactions in your accounting tool

The first step in closing your books is to categorize all your transactions accurately. Use your accounting software to assign the appropriate categories to each transaction, such as revenue, expenses, assets, or liabilities.

#2 Pull your latest actuals into your budgeting platform

To use this financial information in a meaningful way, it's essential to integrate your accounting and budgeting platforms. By pulling your latest actuals into your budgeting software, you can easily compare them to your forecasted amounts and identify any discrepancies or areas that require further analysis.

#3 Verify that your transactions are categorized correctly

Use your budgeting platform to drill down into individual transactions. This step allows you to catch any misclassifications or errors that might affect your financial reports.

#4 Identify large variances compared to your forecast

Identify significant variances between forecasts and actuals to understand where your business is deviating from the planned financial targets. Drill down into individual transactions to understand what's driving variances. These variances can highlight areas that need attention and help you make informed decisions for future planning.

#5 Act on large variances where needed

Sometimes variances require actions. This step involves collaborating with relevant colleagues to analyze the reasons behind the variances and to calibrate on a way forward. This could include allocating resources differently or reducing expenses.

#6 Re-forecast as needed

Based on the identified variances and follow-up work, it may be necessary to update your forecasts. Adjust your forecast accordingly to reflect the new insights gained from the actual financial results. This step enables you to adapt your financial plans and make more accurate projections for the future.

#7 Report your key metrics to your stakeholders and comment on large variances

Finally, compile a report of your key financial metrics and share it with your stakeholders. Include a commentary on significant variances and provide explanations for any unexpected deviations from the forecast. This step promotes transparency and ensures that all stakeholders are well-informed about the financial performance of your business.

In conclusion, closing your books every month is a critical financial management task that helps you maintain accurate records and make informed decisions. Implementing these steps will enhance your finance workflow and contribute to the overall success of your business.

Learn more about creating efficient finance workflows here.