Conducting a Proper Period End Close and Why It’s Important

Properly closing your accounting books and records each period is important for timely, accurate financial data. The period can vary from yearly to weekly, depending on your organization’s volume. The most common period is monthly. 

Key Takeaways 

• A thorough month-end close helps maintain accurate, timely financial data that supports smarter decision-making. 
• Regular reconciliation and confirmation of Balance Sheet accounts help prevent errors, fraud, and overlooked transactions. 
• Monthly reviews of income statement variances strengthen financial oversight and highlight potential issues early. 
• A consistent close process builds confidence in your numbers and keeps your organization financially prepared and proactive. 

What Does a Proper Close Entail? 

A proper close includes reconciliation and confirmation of Balance Sheet accounts and review of the income statement. Starting with the Balance Sheet, all accounts should be reconciled and/or confirmed back to a supporting document. 

Assets

Bank Accounts 

Performing monthly reconciliations is key to verifying that all transactions are posting to the bank statement in a timely and accurate manner. This allows you to follow up on outstanding items, confirm each transaction clearing the bank is included in the general ledger/accounting records, and review the bank statement for unauthorized transactions. 

The reconciliation process traces bank transactions in the accounting records back to the bank statement and notes outstanding items. Your accounting systems should provide a tool for this process. 

Accounts Receivable 

Reviewing open accounts receivable at least monthly is key to keeping customers on track for payment terms, following up on open balances, and conducting write-offs in a timely manner. 

Each month, your organization should have an associate review the accounts receivable aging report to verify that all items are correctly outstanding, and follow up on older items and any negative amounts under investigation. The total on the accounts receivable aging report should match the trial balance. 

Prepaid Expenses 

Properly tracking prepaid expenses is important for accurate expense reporting. Expenses paid that have a benefit over several periods should be recorded as an asset and expensed over the coverage period. 

These are typically tracked on a supplemental schedule/spreadsheet. This schedule should be confirmed by comparing it back to the accounting records to make sure the proper expense has been recorded. 

Fixed Assets 

Capitalized property, plant, and equipment must be tracked and depreciated over their lives. 

Investments 

Investment activity should be recorded monthly, breaking out the revenue and expense categories of dividends/interest, realized gains or losses, unrealized gains or losses, and investment fees. Confirming the ending investment statement balances back to the Balance Sheet to verify everything is recorded. 

Other Assets 

Other Asset accounts can vary in usage, but confirming the ending balance to a document and reviewing current-period transitions for reasonableness are key. 

Liabilities and Equity 

Accounts Payable 

Reviewing open accounts payable at least monthly is key to keeping vendors paid timely and making sure all payments are correctly posted. Each month, your organization should have an associate review the Accounts Payable Aging report to verify that all items are correctly outstanding and follow up on older items and any negative amounts that have been investigated. The total on the Accounts Payable Aging report should match the trial balance. 

Credit Cards 

Performing monthly reconciliations is key to verifying transactions are posting to the credit card statement timely and accurately. This allows you to follow up on outstanding items, confirm each transaction clearing the bank is included in the general ledger/accounting records, and review the credit card statement for unauthorized transactions. The reconciliation process traces credit card transactions in the accounting records back to the statement and notes outstanding items. Your accounting systems should provide a tool for this process. 

Other Liabilities 

Payroll or sales tax liabilities, due-to, and other liability accounts should be reviewed to make sure they are accurate. If a confirming document exists, that is the ideal support. For example, a sales tax return confirms the sales tax liability account. 

Loans 

Loan accounts need to be confirmed back to their loan document. Payments should be accurately broken out into principal reductions applied against the loan balance and interest payments allocated to interest expenses. 

Retained Earnings 

Retained Earnings, or similar accounts, should be consistent with what was reported on the last tax return. Your organization should also have any variances investigated. 

Income Statement 

Once you have all the Balance Sheet accounts reconciled and confirmed, we recommend performing the following review techniques on the Income Statement as a best practice. 

• Analytical Analysis: Pull up several comparisons and review variances. The current month-to-prior month and current year-to-date-to-prior-year-to-date are two great reports. Look for unexpected or significant variances and review for accuracy. Look for accounts that are zero in the current period but have amounts in prior periods and verify nothing was missed or misclassified. 
• Confirm payroll wages and tax accounts to supplemental payroll records. 
• If applicable, you should perform a ratio analysis or a review of the budget to actuals. 

Why a Strong Month‑End Close Matters 

Closing your books keeps your financial picture clear and your organization running smoothly. When you take the time to reconcile accounts, confirm balances, and review your income statement, you set yourself up for fewer surprises and smarter decisions. A solid close process means you can trust your numbers, plan with confidence, and stay ahead of the curve. 

With a little diligence now through a monthly financial health check, you can save your organization headaches later. 

Do you need help conducting a proper month-end close for your organization? Contact us today to find out how we can assist.