Is Your Month-End Hectic? Here’s a Month-End Close Checklist

A reliable month-end close checklist acts like a cheat sheet to ensure your entire accounting process is airtight. It creates a structured workflow that you can refer to so that you make sure no financial stone is left unturned, setting your organization up with accurate financial data by a certain date so you can use that data to report and make critical operating decisions.

By standardizing your month-end close process, your entire team knows which financial tasks need to be completed, when they’re due, and who’s reviewing them. When the process is finished, you’ll have clean, detailed records of your finances for that month.

With so many details to tie up, month-end can feel pretty hectic for your startup. But the beauty of having a month-end close checklist to lean on is that you have a tried and true plan for success. 

We’re going to walk you through the process step-by-step, sharing our top tips for what to do and what to avoid. This is the entire workflow we mapped out in our month-end close checklist, which you can download for free.

Bank

The first step in the month-end close process is reconciling your bank accounts and any associated credit cards. 

To Do

Create a step in your checklist for each bank account and credit card, making sure they are each reconciled individually. 

Note any discrepancies, such as payments currently in transit. Set your due dates for these tasks based on when each bank statement is ready. 

To Avoid

Don’t wait until the last minute to reconcile your transactions. Instead, process transactions as they come in or on specified days each week. This gives you an opportunity to get ahead, so you’re not swamped at the end of the month. 

Payroll

Once you’ve reconciled your bank accounts, the next big step is reconciling payroll. Not only do you need to make sure that each payment is correct, but you’ll also need to review payroll taxes for accuracy. 

To Do

Your payroll reconciliation process should be built around your employee paycheck periods. Consider whether your employees are paid weekly or biweekly and when work hours are processed. 

For example, hours worked at the end of the month might not be processed until the next pay period, and you’ll need to make sure that’s accounted for in the payroll process. 

Additionally, factor in any new hires or employees that have left. New hires may not have been added to your system yet, and recent employees may still be there, so double-check to make sure this doesn’t create payroll inaccuracies. 

To Avoid

Payroll reconciliation isn’t a one-size-fits-all process. Every startup has its own policies for vacations, 401k matches, bonuses, and severance. This should all be factored into your month-end close. 

Expenses and Reimbursements

Travel expenses and other reimbursements need to be processed for your entire organization. 

To Do

Make sure you’re familiar with your organization’s expense policy when completing your month-end close. Your team should know which types of travel are and are not approved, as well as the types of receipts that are required. 

Ideally, you should have an expense template in place to streamline this process. 

To Avoid

Don’t pick and choose how you want to handle expenses on a case-by-case basis. Your organization should have a consistent policy in place for all employees. Without a policy to guide you, expense reconciliation will quickly get confusing—not to mention, it could result in inequity among your employees. 

COGS

The cost of goods sold affects your bottom line, so it needs to be accounted for during your month-end close. 

To Do

The cost of goods sold looks different for every business model, so take some time to understand exactly which factors make up this number. 

A CPG startup will have a very different COGS breakdown than a SaaS startup. Consider factors like raw material costs, packaging, and manufacturing labor, and track how those costs change over time. 

To Avoid

Don’t attempt to manually track your COGS in an Excel spreadsheet, as this quickly gets time-consuming and could result in inaccuracies. 

Instead, invest in a software program to collect and process this data automatically. As your business scales, you’ll ideally have an inventory management system and 3PL in place to support you in this process. 

Revenue

Revenue recognition is another key part of the month-end close process, particularly for startups. Having your revenue properly recognized for each month is essential for successful funding and passing audits in the future. 

To Do

Your revenue recognition processes should be fully compliant with ASC606, a reporting standard developed by IASB and FASB. This means recognizing revenue when a product has been shipped or your performance obligations have been satisfied, rather than recognizing revenue when the order is placed. 

In your recognition process, make sure to account for the difference between monthly recurring revenue and one-time revenue sources. For example, upcharges and fees will be processed differently than monthly subscriptions. 

To Avoid

Don’t brush off compliance standards when it comes to revenue reporting, as this could cause problems as your startup scales. 

Additionally, don’t get stuck doing this process manually every single month. Instead, look for as many ways to automate your processes as possible. 

Assets and Liabilities

Assets and liabilities both need to be processed at the month-end close and can be done using similar processes. 

To Do

Have a row in your checklist for each balance sheet account relating to your assets and liabilities. 

For example, you might have separate rows for pre-paid, fixed, and intangible assets. Each of these accounts should also have a backup schedule in place for accuracy. 

To Avoid

Don’t put off implementing backup schedules for each of these accounts. The sooner you get your books in good shape, the easier the fundraising process will be. 

Equity

Equity is a key component of any startup’s accounting strategy and should be reconciled every month, even if nothing has changed. 

To Do

While reconciling your equity, review the information in your enterprise resource planning system and tie it back to your supporting schedules. 

To Avoid

Don’t try to maintain your cap table by yourself in Excel. Instead, use Carta or another equity software program. This is particularly important if you have an equity incentive plan or convertible notes that make your equity more complicated. 

Open Items

Any other financial items that are open at the end of the month should be accounted for in your month-end close checklist. 

To Do

We recommend completing a closed checklist for each month individually. This creates a historical record for the month, so it’s easy to reference this financial data in the future. 

To Avoid

A month-end close checklist is often derived from your organization’s chart of accounts. Use moderation when creating new accounts—you won’t want to reconcile 500 items each month, for example. 

Internal Review

Every aspect of your month-end close checklist should be reviewed internally for accuracy. 

To Do

With the exception of any reports generated, every deliverable should have a separate preparer and reviewer. No one on your team should be reviewing their own work, no matter how experienced they are. 

To Avoid

Don’t work without a system of checks and balances in place. Even one inaccuracy in your month-end close could slow down future accounting processes. 

Also, make sure your team is continually updating the checklist throughout the month as tasks are completed. Failing to do this could cause your team to fall behind or repeat tasks. 

Create a More Efficient Month-End Close Process

Month-end tends to be a hectic time for startups. Which is why having a standardized month-end close process is an accounting must-have. 

One of the most popular resources that we offer at Graphite is this month-end close checklist.

Graphite’s month-end close checklist was built from our experience working with hundreds of startups of all shapes, sizes, and industries. When you use this template, you’ll be able to simplify your entire process and make month-end more streamlined and efficient.

We hope this checklist helps you steer the ship in the right direction. But if you need more guidance, you can always reach out to our expert team.