Closing the books.
Month end closing.
Monthly wrap up.
These are terms we throw around in the accounting industry that mean absolutely nothing to those new to business. So what is this monthly close exactly? The monthly close as defined by me:
“The actions you take after the month is over to make sure your bookkeeping and financial records are complete for the month followed by the analysis/dissection of the financial results of your business efforts. “
The monthly close lets you close the prior month (finalize it baby!) and move to a shiny, new month full of promise.It doesn’t have to be crazy complicated or time-consuming. (Ahem, all bets are off if you are months behind on your bookkeeping!) I spend between an hour or two each month on my monthly close. Sometimes I’ll run into a hiccup with the integration between my billing app (Bill.com) and my accounting app (Xero.com) which can take a bit of time to resolve. Otherwise, I’m just spending time analyzing the numbers because I like numbers! Okay, now we know what it is. Here is a bit of motivation and why you need a monthly close NOW!
Your memory sucks. Well, at least your distant memory most likely does. It’s just human nature. The farther you move away from a particular month and its transactions and activity, the less likely you’ll be able to remember the details. No problem if you are in the 2% of the entrepreneur population that keeps meticulous, detailed records. The other 98% of us will be best served figuring out the missing details while we still remember them.
You want to keep your money. Chances are, if you wait too long, you are going to need to pay for help to get caught up. There is a very bad snowball effect here when you fall behind. With each month left unclosed, the task of catching up seems more and more overwhelming. What was originally a DIY project that only cost you in time is now going to cost you time and money. Outsourcing is fine if that was the original plan, but feeling like you have no choice is kinda the pits. You may also miss tax deductions as you fall far behind. Your thinking shifts from “getting it right” to just “getting it done” which can mean paying more in taxes.
You need to know your numbers. I hate to pull the “responsibility” card, but here it is. This is your business and you are responsible for all of it. You need to know your numbers – current, accurate numbers. Having a vague idea of the financial side of your business is no way to effectively run your business.
It just feels good. Yep, I went there. Feelings. Whether your financial results are what you want them to be or way off target, it just feels good to have the monthly close marked off of your to-do list. It just feels good to really know where you stand financially.
Are you fired up about doing your own monthly close? Grab our FREE Busy Entrepreneur’s Monthly Accounting Checklist and get started!
We’d love to know all about your successes and triumphs as you close your books!