casemark/executing-month-end-close

Executing Month End Close

Structures month-end close procedures with journal entry preparation, reconciliation, and variance analysis.

When To Use

• Performing or reviewing a monthly accounting close cycle
• Building or refining a close checklist with task owners and deadlines
• Preparing standard and adjusting journal entries for period cutoff
• Reconciling balance sheet accounts (cash, AR, AP, prepaids, accruals, fixed assets, debt)
• Analyzing period-over-period variances and budget-to-actual deviations
• Generating a close package for controller or CFO sign-off

Inputs To Gather

• Trial balance — current-period and prior-period (or budget) for comparison
• Sub-ledger detail — AR aging, AP aging, fixed-asset register, loan amortization schedules
• Bank statements — all operating, payroll, and investment accounts for the period
• Revenue support — billing reports, deferred revenue schedules, contract milestones
• Expense accrual inputs — purchase orders received-not-invoiced, payroll calendars, benefit invoices
• Intercompany activity — IC transaction logs and elimination entries if multi-entity
• Prior-period reconciliations — to carry forward open items and verify clearing
• Close calendar — target dates, task owners, and dependency sequencing
• Materiality threshold — the amount below which variances are deemed immaterial [VERIFY against entity's accounting policy]

Workflow

1. Pre-Close Preparation (Days 1-2)

• Confirm all sub-ledger postings (AR, AP, payroll, inventory) are complete for the period
• Verify cutoff: ensure revenue and expenses are recorded in the correct period
  • Check ship dates vs. invoice dates for revenue recognition
  • Confirm goods/services received by period end for expense accruals
• Run preliminary trial balance and scan for obvious anomalies (negative balances, misclassified accounts)
• Distribute close checklist with task assignments and deadlines

2. Journal Entry Preparation (Days 2-4)

• Standard recurring entries: depreciation, amortization, straight-line rent, prepaid expense release, loan interest accrual
• Adjusting entries: accrued expenses (utilities, professional fees, bonuses), deferred revenue adjustments, inventory reserves, bad-debt provision
• Reclassification entries: correct mispostings, reallocate shared costs, reclassify current portion of long-term debt
• Intercompany entries: post IC charges, confirm matching balances, prepare elimination entries [VERIFY elimination method — automatic vs. manual per ERP setup]
• For each journal entry, document: account codes, amounts, description/business purpose, supporting calculation or source document reference

3. Account Reconciliation (Days 3-5)

For every balance sheet account, prepare or review a reconciliation:

• Cash & equivalents — bank reconciliation; identify and age outstanding checks and deposits in transit
• Accounts receivable — tie sub-ledger to GL; review aging buckets; assess allowance for doubtful accounts
• Prepaids & other assets — verify amortization schedules; confirm remaining balances are supportable
• Fixed assets — reconcile additions, disposals, and depreciation to the FA register; confirm CIP items
• Accounts payable — tie sub-ledger to GL; confirm completeness against receiving reports
• Accrued liabilities — validate each accrual with source documentation or reasonable estimate
• Debt — reconcile to lender statements; confirm principal, interest, and covenant calculations
• Equity — roll forward from prior period; confirm any issuances, repurchases, or dividend entries

Flag any reconciling items older than 60 days or above materiality for controller review.

4. Variance Analysis (Days 4-6)

• Compute month-over-month and budget-to-actual variances for all P&L line items
• Investigate variances exceeding the materiality threshold or ±10% of budget (whichever is lower) [VERIFY threshold per company policy]
• Categorize root causes: timing differences, volume/price changes, one-time items, accrual true-ups, errors
• Prepare variance commentary for each significant line item — state cause, quantify impact, note whether recurring or non-recurring
• Summarize top 5-10 variances in an executive narrative

5. Close Package Assembly (Days 5-7)

• Compile the following for management review:
  • Final trial balance
  • Income statement and balance sheet (comparative)
  • Cash flow summary (if required monthly)
  • Reconciliation binder or index with status (complete / open items)
  • Variance analysis with commentary
  • Journal entry log with approval status
  • Open items list requiring follow-up in next period
• Obtain required sign-offs (preparer, reviewer, controller/CFO)
• Lock the period in the ERP/GL system after final approval

Output

Deliver a structured close package containing:

• Close checklist — all tasks with status, owner, completion date
• Journal entry schedule — each entry with account, amount, description, and supporting reference
• Reconciliation summaries — one page per account showing GL balance, supporting balance, and reconciling items
• Variance report — table of significant variances with cause, amount, and recurring/non-recurring flag
• Executive summary — narrative highlighting key financial results, unusual items, and open issues

Quality Checks

• All balance sheet accounts are reconciled; no account has an unexplained difference above materiality
• Journal entries balance (total debits = total credits) and have documented support
• Revenue and expense cutoff is verified — no material items recorded in the wrong period
• Intercompany balances net to zero after eliminations
• Variance explanations are specific and quantified — no generic "timing" without dollar amounts
• Close checklist shows 100% task completion before period lock
• [VERIFY] Accounting standards applied (US GAAP, IFRS, or other) are consistent with prior periods
• [VERIFY] Any changes in estimates or accounting policies are disclosed and approved
• Reconciling items carried forward from prior months are resolved or have documented justification for remaining open