Closing Your Books for December? Follow These 6 Steps in This Order

Many finance teams close the month in whatever order things arrive. Then the bank does not match, accruals are missed, and the close drags on.

The fix is simple: do the steps in the right order, because each step depends on the one before it.

Step 1: Post your cash.

Record every receipt and payment from the bank and credit card statements, and match each one to the customer invoice or supplier bill it belongs to.

Step 2: Record your transactions, with a cutoff date.

Issue all customer invoices and record all supplier bills, payroll and staff claims up to a fixed cutoff. Whatever arrives after the cutoff is handled in Step 4.

Step 3: Reconcile the bank and credit cards.

Compare the statement balance with your books. Only timing items, such as cheques not yet cleared, should be left. This tells you Steps 1 and 2 are complete.

Step 4: Make the accrual adjustments.

Record income earned but not yet billed, and expenses for goods or services received where the bill has not arrived. Also release prepaid or deferred amounts that belong to this month.

Step 5: Reconcile the balance sheet.

Tie every balance sheet account to a supporting schedule, such as debtors to the ageing report, creditors to supplier statements, and prepayments to their workings. This catches anything missed earlier.

Step 6: Compare with last month.

Put this month's profit and loss and balance sheet next to last month's, and explain any big change. If you cannot explain it, something is probably missing or wrong.

Why does the order matter?

You cannot reconcile the bank before the cash is posted, and you cannot check the balance sheet before the accruals are in. Doing it out of order means doing it twice.

For business owners, a clean close means reliable December numbers and a smoother audit and tax filing.

A checklist with a name and deadline for each step helps the team close on time.

If you would like help with monthly management reporting, bank reconciliations or keeping your records in order, our Financial Operations Support team can assist. Feel free to WhatsApp us at 010-246 2151.