month end

Month End Accounts and Reconciliations

Quick tips for a more efficient and effective close.

 

By Jeremy Myers, CPA

Audit Supervisor at Atchley & Associates, LLP

 

Businesses, much like your personal finances, balance their books on a monthly basis, or they should. The month end close process of reconciling bank accounts or even credit cards accounts are typically the last item that gets reconciled and closed each month.  This process insures that you have recorded all of the bank transactions such as bank fees or ACH payments/deposits that your business did not already have a paper form of payment.  Also in the sense of reconciling your business’ credit card bill to insure all the charges are proper, have support (receipts kept and attached to the statement), and that no unknown or possible fraudulent charges have made your statement with the end result of showing the complete liability for items that you have not yet paid for. For any control based procedure there is a need to insure the procedure is being performed timely and accurately.

Now that most statements are available online complete the next day after the statement close, the timeliness of the reconciliation can be taken out of the equation.  You just need to set up a schedule and by X day of the month, each month, every month, the account gets reconciled and any entries for transactions that have happened get put into the accounting system.

The other main attribute for effective procedures is accuracy and this attribute is just as much about transcribing the numbers from the statement in to the accounting system as it is as making sure you are reconciling the account to the proper date.  Most bank accounts, unless asked for otherwise, are set up based on the day of the week you opened the account.  For personal use, this might not be a bad thing, however, for businesses, most do not have mid-month closing dates.  Our biggest recommendation is make sure that your statements: bank, investments, credit card, etc… are on a month end basis.  That way you know you are reconciling your statement to each month end, and most importantly, year-end (as each of the months close into the end of the year).  This can be accomplished by simply calling your banker, investment advisor, credit card dealer, etc… and asking them to change your statement to a month end basis; this should cover the months that end in 28, 29, 30, or 31 days.

By performing your reconciliations timely and at the appropriate end date (typically month and year end) you can insure all of the transactions occurring during the month are appropriately recorded in your businesses’ records and for those pesky accruals, you can accrue an entire credit card statement instead of trying to add up the certain transaction that occurred prior to the end of the month.