This blueprint serves as an outline to guide and improve your month-end process. It offers a starting point for developing more detailed documentation tailored to your organization’s needs. Use it as a tool to evaluate your existing processes, identify gaps, and generate ideas for process improvement.

Benefits of a Well-Coordinated and Communicated Month-End Close

Improved Accuracy and Compliance

• Reduces the risk of errors and omissions by ensuring all transactions are properly recorded.
• Ensures compliance with accounting standards (e.g., GAAP, IFRS) and regulatory requirements.
• Supports the accuracy of financial reports, minimizing the need for corrections or re-statements.

Timely Financial Reporting

• Ensures financial statements (income statement, balance sheet, and cash flow) are delivered on time.
• Facilitates prompt reporting for management, auditors, and external stakeholders.
• Supports timely decision-making by providing up-to-date financial data.

Enhanced Collaboration Across Teams

• Encourages communication between accounting, finance, operations, and department heads.
• Ensures shared ownership of tasks, reducing bottlenecks and last-minute surprises.
• Fosters teamwork by providing clear roles, responsibilities, and deadlines for each department.

Reduced Operational Disruptions

• Minimizes disruptions by ensuring processes such as accounts payable, accounts receivable, payroll, and inventory management run smoothly.
• Prevents delays in customer invoicing or vendor payments, supporting business continuity.

Clear Audit Trail and Accountability

• Provides a clear audit trail through documented processes, reports, and reconciliations.
• Increases accountability by assigning task ownership and tracking progress.
• Ensures documentation is organized and readily available for internal and external audits.

Faster Issue Resolution

• Identifies discrepancies early, allowing for quick resolution of variances before they escalate.
• Reduces the need for post-close adjustments by encouraging proactive error detection.

Better Forecasting and Budgeting Alignment

• Provides accurate data to compare actuals vs. budgets, ensuring forecast accuracy.
• Facilitates variance analysis and helps management make informed decisions to adjust forecasts.

Improved Cash Flow Management

• Timely reconciliation of cash flows helps manage liquidity and cash availability.
• Supports proactive management of receivables, payables, and capital expenditures.

Strengthened Internal Controls

• Reduces the risk of fraud or financial mismanagement through clearly defined processes and oversight.
• Establishes controls for review and approval at each step of the close process.

Reduced Stress and Improved Morale

• Provides a structured process with clear expectations, reducing last-minute stress for teams.
• Improves employee morale by ensuring workload is balanced across the close period.
• Builds trust between departments through consistent communication and support.

A well-coordinated and communicated month-end close improves accuracy, compliance, and efficiency, while fostering collaboration between teams. It ensures timely financial reporting, strengthens internal controls, and enhances forecasting and decision-making. This proactive approach reduces operational disruptions, promotes accountability, and builds a more resilient financial close process.

Review Previous Month’s Close

• Analyze discrepancies and adjustments: Verify any unresolved issues or adjustments from the previous month to ensure they don’t carry over.
• Document corrective actions: Record any lessons learned and apply them to the upcoming month-end processes.

Systematically Open the Next Period

• Unlock the new accounting period: Ensure journal codes are available for posting transactions.
• Communicate system readiness: Notify relevant departments that the new period is open for posting.

Communicate Timeline and Deadlines

• Notify relevant departments: Send notifications to all stakeholders regarding the month-end schedule.
• Update the Month-End Calendar with cutoff dates for:
  • Accounts Payable (AP), Accounts Receivable (AR)
  • Assets, Inventory, Cash Receipts, Unbilled Revenue
  • Depreciation, Amortization, and Disposals
  • Tax preparation, Financial and External Reporting
  • Revenue, Accruals, and Adjustments

Review Project, Revenue, and Billing Setup

• Rate and Node Validation: Ensure all rate sequences, revenue nodes, and billing nodes are correctly set up for direct and intercompany projects.
  • Loaded Labor Formulas: Confirm that rate sequences are defined for labor charges.
  • Revenue Nodes: Validate revenue nodes for direct projects, ensuring only unbillable/unallowable nodes are excluded.
  • Billing Node Setup: Ensure billing nodes are correctly configured without timing issues for transactions.
  • IWO (Intercompany Work Order) Setup: Verify that IWO projects have:
    • Proper project classifications.
    • Accounts payable/receivable account information.
    • Correct mappings for IWO expenses.

Transaction Processing

Guidance for Finalizing Transactions to Support Month-End Close

To ensure an efficient month-end close, all transactions must be accurately recorded, reviewed, and finalized. Below is a structured approach to finalize transactions for various areas that impact financial reporting.

Accounts Payable

• Resolve open reconciliation items from previous months.
• Record subcontractor vouchers, credit card transactions, and travel expenses.
• Match invoices to purchase orders (POs): Investigate discrepancies using the “Recompute Discrepancy” tool.
• Accrue for outstanding payables: Post accruals for:
  • Travel expenses, credit card expenses, and recurring expenses not yet invoiced.
  • Goods/services received but not yet vouchered.

Assets

• Reconcile and record new asset purchases.
• Verify capitalization: Move qualifying purchases to the asset register.
• Dispose of assets and post gains/losses to the GL.
• Run depreciation and generate reports:
  • Validate depreciation entries and review CWIP items for completion.

Purchase Orders (POs)

• Run Open PO Reports: Identify POs requiring closure or follow-up.
• Mark fully received POs as closed and cancel unused POs.
• Investigate variances between POs, receipts, and invoices.
• Update remaining partial POs if only part of the order is fulfilled.

Inventory Management

• Perform physical counts or cycle counts to verify inventory levels.
• Reconcile inventory movements with receipts and transfers.
• Adjust for discrepancies identified during physical counts.
• Run inventory valuation reports and adjust for market value if necessary.
• Accrue for in-transit inventory and reconcile the inventory ledger with the GL.
• Lock the inventory module after all transactions are posted.

Cash Receipts

• Record all cash payments: Ensure all cash, check, and electronic receipts are entered.
• Match bank deposits with cash receipts and investigate discrepancies.
• Post accruals for late deposits or unprocessed receipts.
• Apply payments to customer AR balances and post necessary adjustments.
• Perform bank reconciliation: Ensure the GL reflects all receipts and deposits.

Check Disbursements

• Record all checks issued and voided during the period.
• Reconcile the check register with the bank statement to confirm cleared payments.
• Accrue for outstanding checks: Investigate any stale or uncashed checks.
• Generate disbursement reports and ensure all entries are posted to the GL.

Timesheets

• Notify employees and managers of timesheet deadlines.
• Validate submissions and escalate missing entries.
• Ensure managerial approval by the cutoff date.
• Process timesheets for payroll, billing, and project tracking.
• Lock timesheets and post labor costs to the GL.
• Run reports to reconcile hours with budgets and payroll.
• Finalize and archive timesheet data to complete the month-end close.

Revenue Management

• Review all sales orders and invoices to ensure they are recorded. Ensure all revenue earned in the period is recorded according to ASC 606 or IFRS 15 standards.
• Accrue for uninvoiced sales to ensure revenue is recognized in the correct period.
• Recognize deferred revenue according to accounting policies.
• Reconcile revenue subledgers with the GL and resolve any discrepancies.
• Monitor discounts, returns, and allowances: Apply any adjustments as needed.

Unbilled Revenue Management

• Identify unbilled transactions: Ensure all services and deliveries are accounted for.
• Post unbilled revenue accruals based on services provided but not yet invoiced.
• Reconcile unbilled revenue with the GL to ensure accurate reporting.
• Monitor aging reports to track delays in invoicing and follow up with project managers.

Billing Process

• Generate and issue invoices for all completed services and sales.
• Post invoices to the GL and verify correct posting dates.
• Issue credit notes and apply adjustments as needed.
• Reconcile billing with AR to ensure all invoices are accurately recorded.
• Accrue for unbilled revenue to reflect all completed services.

Intercompany Transactions and Consolidations

• Reconcile Intercompany Accounts: Ensure all intercompany transactions are matched and balanced.
• Post Eliminations and Adjustments: For consolidation, eliminate any duplicate or intercompany entries.
• Verify Consolidated Reports: Ensure group-level reports reflect the correct consolidated financials.

Payroll and Employee Expenses

• Record Payroll Entries: Ensure payroll expenses, benefits, and tax liabilities are posted accurately.
• Accrue for Wages Payable: Record wages and bonuses earned but not yet paid.
• Process and Reconcile Employee Expenses: Ensure all employee expense reports and travel reimbursements are recorded.

Budgeting

• Collect actual financial data from the ERP system.
• Compare actuals with the budget to identify variances.
• Conduct variance analysis to determine root causes.
• Update forecasts and adjust budgets where needed.
• Prepare consolidated reports for management.
• Update budgets and forecasts in the ERP system.
• Communicate insights and guidance with stakeholders.
• Archive reports for future reference and audits.
• Plan for the next month’s budgeting priorities.

This process ensures that budgets remain accurate, responsive to change, and aligned with strategic goals, fostering better financial management and decision-making.

Accruals

Accounts Payable (AP) Variance Accruals

• PO vs. Invoice Variances:
  • Accrue for differences between purchase order (PO) amounts and invoiced amounts.
  • Example: Vendor billed more or less than the original PO amount.
• Goods Received but Not Invoiced (GRNI):
  • Accrue for received goods that have not yet been invoiced.
  • Example: Warehouse receipt confirmed, but vendor invoice is pending.
• AP Timing Accruals:
  • Accrue for expenses related to the current period but not yet processed in AP.
  • Example: Utility bills for the month not yet received.

Accounts Receivable (AR) Variance Accruals

• Unapplied Cash Variances:
  • Accrue for customer payments received but not applied to the correct invoices.
  • Example: Payment in suspense due to missing remittance details.
• Unbilled Revenue Accruals:
  • Accrue for services or goods provided but not yet invoiced.
  • Example: Project milestones met, but the invoice will be sent next month.

Inventory Variance Accruals

• Inventory Receipt Accruals:
  • Accrue for inventory received but not yet recorded in the system.
  • Example: Goods in transit or partially received.
• Inventory Shrinkage or Write-offs:
  • Accrue for known losses due to theft, damage, or obsolescence.
  • Example: Physical count reveals lower stock than system records.

Payroll and Labor Variance Accruals

• Accrued Wages and Overtime:
  • Accrue for wages earned but not yet paid.
  • Example: Pay period overlaps the month-end.
• Bonus and Incentive Accruals:
  • Accrue for bonuses or incentives earned but not yet processed.
  • Example: Annual performance bonus allocated throughout the year.
• Unrecorded Employee Expenses:
  • Accrue for reimbursable travel or business expenses submitted after month-end.

Fixed Assets and Depreciation Accruals

• Capitalization Variance Accruals:
  • Accrue for capital expenditures incurred but not yet capitalized.
  • Example: Asset purchase completed, but invoice is not yet posted.
• Depreciation Adjustments:
  • Accrue for depreciation for new assets placed in service mid-month.
  • Example: Asset started use mid-month, but depreciation was not recorded.

Revenue and Deferred Revenue Variance Accruals

• Revenue Recognition Accruals:
  • Accrue for revenue earned but not invoiced or posted.
  • Example: Subscription services delivered but invoice sent in the following period.
• Deferred Revenue Adjustments:
  • Adjust for revenue received in advance but not yet earned.
  • Example: Customer prepaid for services to be delivered over several months.

Cost of Goods Sold (COGS) Variance Accruals

• COGS Accruals for Unrecorded Inventory Movements:
  • Accrue for cost of goods sold on shipped items not yet recorded.
  • Example: Goods shipped before month-end, but sale recorded in the next period.
• Cost Variances from Production:
  • Accrue for material, labor, or overhead variances from standard costs.
  • Example: Production run incurred higher material costs than expected.

Tax and Regulatory Accruals

• Sales Tax Payable Accruals:
  • Accrue for sales tax collected but not yet remitted.
  • Example: Month-end sales tax to be paid in the next period.
• Income Tax Accruals:
  • Accrue for estimated corporate income taxes.
  • Example: Quarterly tax payment due but not yet recorded.

Other Accruals and Adjustments

• Accrual for Legal Fees or Settlements:
  • Accrue for known but unpaid legal expenses or settlements.
• Recurring Expense Accruals:
  • Accrue for monthly recurring costs not yet invoiced, such as rent or IT services.
• Intercompany Variance Accruals:
  • Accrue for differences between intercompany transactions.
  • Example: Services provided by one entity but not yet recorded by the other.

Reconciliations

To ensure the accuracy and completeness of the company’s financial statements by performing timely and accurate account reconciliations. This SOP covers both bank reconciliations and account reconciliations for balance sheet and income statement accounts, ensuring all accounts are properly aligned with subledgers, reports, and supporting documentation.

Reconciliation Guidance Using ERP and Reporting Tools

1. Leverage Standard Reporting within the ERP System
   • Utilize the built-in reports and standard reconciliation tools provided by your ERP application to streamline the reconciliation process.
   • Identify reports specific to key areas such as accounts payable (AP), accounts receivable (AR), unbilled revenue, inventory, and bank accounts to ensure accurate reconciliation.
   • Review balance sheet and income statement reports to identify discrepancies between subledgers and the general ledger (GL).
2. Utilize Reporting Tools for High-Volume Transactions
   • If dealing with a large volume of records, standard ERP reports may not always provide sufficient detail or flexibility.
   • In these cases, create custom reports or queries using tools like Cognos, Power BI, or other reporting tools that integrate with your ERP system.
3. Automate Repeatable Reconciliations
   • For recurring reconciliations, consider developing reusable reports to minimize manual effort.
   • Automate routine queries where possible to ensure reconciliation tasks can be performed consistently and efficiently each period.
4. Use Reconciliation-Specific Tools
   • Leverage account reconciliation tools that offer transaction-level matching by account. Some ERP systems or external reporting solutions provide modules specifically for account reconciliations that:
     • Match transactions by account, amount, or date.
     • Identify variances automatically for further investigation.
     • Provide audit trails for compliance and transparency.
5. Align Reporting with Reconciliation Objectives
   • Ensure that the reports you generate align with the purpose of the reconciliation—whether validating transactions by account, identifying outstanding items, or ensuring period cutoff accuracy.
   • Use these tools to reconcile variances proactively and document any discrepancies for future reference.

By leveraging standard ERP reports, custom queries, and reconciliation tools, you can ensure that the reconciliation process is accurate, efficient, and repeatable. This approach also ensures alignment between subledgers, GL accounts, and supporting reports, improving both financial accuracy and audit readiness.

Balance Sheet Account Reconciliation

Objective: Ensure all balance sheet accounts match corresponding subledgers or supporting schedules.

Steps:

Accounts Payable (AP):

• Run Open AP Aging Report: Confirm the aging report balance matches the GL.
• Investigate discrepancies and correct as necessary.

Accounts Receivable (AR) and Unapplied Receipts:

• Reconcile the AR aging report with the GL balance.
• Review unapplied receipts and ensure they are correctly allocated to invoices.

Accrued Wages and Payroll – Gross to Net:

• Confirm accrued wages are accurately reflected in the GL.
• Reconcile payroll amounts from gross to net calculations with payroll reports.

Assets and Depreciation:

• Ensure that all asset purchases and disposals are recorded in the fixed asset register and match the GL.
• Reconcile depreciation with asset schedules and post adjustments if needed.

Bank Reconciliation

• Objective: Verify that all bank transactions are accurately recorded in the company’s financial records.
• Process:
  1. Retrieve Bank Statements: Obtain bank statements for the period being reconciled.
  2. Compare Bank Transactions with GL Records: Match bank transactions to entries in the general ledger (GL).
  3. Identify Discrepancies: Investigate any differences between bank statements and GL balances (e.g., outstanding checks, unrecorded deposits).
  4. Post Adjustments: Record any adjustments (e.g., bank fees, interest earned) to the GL.
  5. Finalize Reconciliation: Ensure that the adjusted GL balance matches the bank statement balance.
  6. Document and File: Store reconciliation reports for internal audit and review.

Deferred Revenue and Other Accruals:

• Ensure deferred revenue schedules align with the GL and contracts.
• Reconcile other accruals (e.g., recurring expenses, unrecognized liabilities).

Prepaids and Inventory:

• Review prepaid expense schedules and ensure proper amortization.
• Match physical inventory counts and subledgers with the GL.

Unbilled Revenue:

• Verify all unbilled revenue accruals align with contracts and services
• Confirm reconciliation between the unbilled subledger and the GL.

Other Balance Sheet Accounts:

• Perform reconciliations for any other balance sheet accounts not covered above.

Income Statement Account Reconciliation

Objective: Confirm that income statement accounts reflect accurate costs, allocations, and revenue recognition.

Compare GL Costs to Project Costs:

• Run GL to Project Costs Utility to compare general ledger transactions with the project subledger.

Ensure Preliminary Processes Are Completed:

• Confirm pool links are created and rate application tables are built.
• Load service center allocations into the accounting system.
• Compute Pools and Burdens:
• Run SIE (Statement of Indirect Expenses) computations to ensure indirect costs are calculated.
• Compute burdens and ensure correct assignments to cost pools.
• Confirm Function Codes in Project Setup Ensure function codes are assigned correctly and that activity exists for each account in the PAG (Project Account Group).
• Load labor rates for the period (YTD).
• Compute revenue and ensure correct alignment with project activities.
• Redistribute Non-Transactional Revenue (Optional):
  1. Allocate non-transaction-based revenue (e.g., fees or revenue adjustments) to the appropriate nodes.
• Post Revenue to the GL:
  1. Post actual or target revenue and confirm revenue postings align with the GL.
  2. If target rates with variances are used, ensure variances are allocated to the balance sheet.
• Evaluate Multi-Job Processing (If Applicable):
  1. Review whether multi-job burdens require additional processes.
  2. Compare GL to the Project Subledger and run FS (Financial Statement) comparisons to resolve discrepancies.

Revenue

Calculate / Update EACs.

Review Pool Variances:

• Check for unabsorbed variances in pools and confirm they are immaterial.

Revenue Subledger to General Ledger (GL):

• Verify that revenue postings align with owning or performing project rules.
• Confirm whether revenue postings follow the policy for target or actual recognition.
• Ensure that indirect expenses are correctly allocated to the SIE (Statement of Indirect Expenses) and that unallowable costs are excluded.

SIE to General Ledger (GL):

• Confirm that all allowable costs align with the SIE, ensuring that any unallowable costs are excluded.

PSR (Project Status Report) to SIE:

• Reconcile PSR data with the Statement of Indirect Expenses to confirm consistency.

PSR to Revenue Summary:

• Match the revenue reported in the PSR with the Revenue Summary for accurate reporting.

PSR to Revenue Worksheet:

• Validate that the PSR revenue figures align with the data in the Revenue Worksheet.

Unbilled Reconciliation:

• Ensure all unbilled balances are categorized correctly.
• Assign appropriate actions for each category (e.g., rate variances, cost reclassifications, write-offs), or confirm if no action is required.

Record Adjustments and Close the Period

• Post Adjustments: Ensure all required adjustments are recorded in the GL.
• Lock the Period: Once reconciliations are complete, lock the accounting period to prevent further changes.
• Communicate with Key Teams: Notify relevant departments that the reconciliation and close process is complete.

Final Review and Communication

• Review month-end reports with the Controller or Finance Manager.
• Coordinate with all departments to ensure completeness and accuracy.
• Lock modules to prevent further changes and finalize the close.