Establishing a Month End Closing Process for Your Business: A Key to increasing the value of your business.
Simply put, a month end closing process is an accounting term to settle the score for the month. Your monthly closing process should help you understand what money came in, what went out, and the outstanding receivables and payables. It is absolutely essential that you close out every month and put all of these numbers in front of you in order to run a profitable business. It wouldn’t be a good idea to spend money for your household needs each month without knowing your expenses and having a budget. In the same way, a month end closing process is way to “keep tabs,” so to speak, that is necessary for the growth and sustainability of your small business as well.
When to Start the Month End Closing Process
Your month end closing process should happen on the same day each month. This allows you to keep consistent and benchmark your progress over a standard time period for each month. We recommend the first business day of the month. The process should not stretch on for weeks. In fact, if your books are in good order, then the month end closing process should take no more than a single day—and depending on the size of your business, it could take no more than an hour!
The Value of a Month End Closing Process
Remember that knowing where you stand financially makes you better able to make decisions that benefit your business. The month end closing process allows you to clearly see if you’re meeting your goals and objectives. If you don’t close out the month and try take a look at those numbers, you may have no idea who has paid and what bills are still lurking out there! When you’re ready to exit your business and sell its vitally important you demonstrate to potential buyers that your accounting processes and your month end closing process is strong.
Avoid These Mistakes
It’s easy to get caught up in the action of your business. But don’t forget the importance of taking count and tracking the current state of your activities. The main reasons business owners don’t have a monthly closing process is either:
• They know things aren’t going as well as they would like and they keep putting off a hard look at the numbers and facts. This is not a good idea. You need to know how you are doing, so you can target areas for improvement! If you don’t benchmark your progress, you could be spiraling further into a hole.
• Closing the books monthly takes too long and is too tedious, because they don’t use integrated accounting and bookkeeping software that simplifies the process and is user-friendly.
Work With a Leading Business Exit Planner
BroadCreek would be happy to help you access your current monthly close, help you access and choose an accountant, and show you why it’s so important to your businesses value to have a regimented monthly close process. Contact us today and we’ll review your situation and discuss your exit options and how we can help with your business’s needs.