Checklist for Closing Books

Closing your organization’s books each month ensures those in charge of governance receive financial statements on time on a regular basis. Because these statements need to be accurate and prepared quickly, it helps to have an established routine of closing the books, especially if you are doing so without the help of a CPA.

You’re ready to close the books after you have completed the daily entries on the last day of the month. As you follow the general procedure for closing your books, keep the following steps in mind.

Book-Closing Checklist

1. Run a 12-month monthly statement of activities (income statement) and verify if routine revenues and expenses have been entered. For those not received, contact vendors.
2. Ensure that all accounts payables have been entered for the month. Enter the invoice in its entirety, including invoice date, due date, and invoiced amount.
3. Verify all invoices have been processed for the month and payments received were entered and deposited in the bank account.
4. Follow up on all non-deposited funds and/or suspense accounts.
5. Reconcile bank balance.
   1. Review any outstanding deposits. Deposits reflected on the general ledger should closely mirror the date they were posted to the bank account. Follow up on date gaps or long outstanding deposits, as these are red flags.
   2. Review any outstanding checks over 30 days old. Follow up with these vendors and find out why the checks were not cashed.
6. For outstanding items over 60 days old in Accounts Payable, determine reason for nonpayment. Not paying vendors on time could jeopardize the relationship and future services.
7. For Accounts Receivable, discuss any accounts that have not been paid and their likelihood of being collected. Specifically, follow up on amounts over 60 days old.
8. Complete routine journal entries for accounts such as depreciation, amortization, accruals, payroll, and donor-designated accounts.
9. Verify subsidiary ledgers match the trial balance. These ledgers include accounts receivable, accounts payable, fixed assets, depreciation, and others.
10. If any inter-company transactions occurred this month, ensure balances match on both sets of books.
11. Produce financial statements and review with a member of management for accuracy.
    • These financial statements typically include the Statement of Financial Position (balance sheet) and Statement of Activities (income statement), and also possibly Budget to Actual, Prior Year to Current Year, among others.
    • Once internal management and department managers have approved them, provide financial statements to Board of Directors or Ownership group for approval.
    • Boards of Directors and owners typically expect to see financial statements between two and three weeks after the end of the month.
12. Once the financial statements are approved by those in charge of governance, you are ready to close your books!

An Important Final Product

Financial statements are the product of accurate and complete books. Organizations rely on timely financial statements to make decisions and set new goals. The longer the delay after the end of the month and the presentation of the financial statement, the greater the concern is for lack of accurate reporting or time spent making course corrections.

Set a clear course and a quick pace, using these guidelines to help you as you close your books each month.

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