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Closing Your Financial Quarter

It’s About More than the Numbers

Closing out the quarter and preparing for year-end is always a good time to review some reminders about a financial quarter close. There’s no doubt about it – a healthy business has healthy financial statements. And much of the health of those statements is based on the processes you have in place for, and the value you place on, your quarter-end close. These processes create benchmarks to measure the success, or lack thereof, of your quarter and the business overall. Otherwise, how would you truly know if you’re doing well?

A Quarter-End Close Starts with the Numbers

How much you get out of your quarter-end close is based, in large part, on how much you put into it – and it starts long before the end of the quarter. That means ensuring you maintain detailed records throughout the quarter, have effective processes in place before you begin, and invest in the tools you need for those processes. As a vital part of the accounting cycle, closing the quarter represents the cutoff point for transactions. With balances zeroed out, you can start the next quarter fresh and on track.

In a quarter-end close, all financial records for the immediately preceding quarter are reviewed, recorded, and reconciled. The information needed is similar to a month-end close, with the addition of payroll reports and quarterly returns. Generally, this would include:

  • Bank account information
  • Inventory
  • Fixed assets
  • Profit and Loss (P&L) Statement
  • Balance Sheet
  • Payroll Statements
  • Form 941s

As with any monthly close, reviewing the P&L together with the Balance Sheet will provide a complete financial picture. With the P&L, which shows current performance, it’s recommended to get into the details so it’s easier to spot differentials in any recorded transactions. On the other hand, the Balance Sheet shows the overall health of the business and its liquidity at a specific moment (in this case, the end of the quarter). 

Other Quarter-End Considerations

Payroll reconciliation and Form 941s are a crucial part of a quarter-end close, especially for third quarter, so that any adjustments can be made prior to filing the annual Form W-2, Wage and Tax Statement. Board and committee minutes required for annual audits should also be approved at this time, along with any scheduled quarterly audits. Additionally, with more businesses operating virtually or in a hybrid mode, it’s a good time to ensure the company has the most up-to-date, accessible technology and platforms, and/or the budget to invest in them.

Quarter-End Reminders

  1. Confirm all transactions for the quarter
    • Timesheets, payroll
    • Accounts payable, accounts receivable
    • Expense reports
    • Income and expense transactions
  2. Perform reconciliations
    • Bank accounts to bank statements
    • AP and AR aging to subledger, then to general ledger
    • Actual inventory to general ledger inventory
    • If using a point of sale or e-Commerce platform, reconcile sales reports to P&L
  3. Close subledgers
    • Pending, draft transactions finalized
  4. Input closing entries in the general journal
    • Deferrals, accruals, reversals
    • Depreciation, amortization
    • Every transaction entered
  5. Run reports
    • Budget vs. Actual

Much More than Numbers

While some “non-accountant-type” people may roll their eyes at the idea of another task that must get done or that is simply a waste of time, closing out the quarter is about much more than reconciling numbers. It’s even about more than the financial statements themselves. Rather, a quarter-end close is an invaluable resource to gather data that demonstrates how the company is doing overall, if it is meeting its quarterly goals and on track to meet its annual goals, and what opportunities lay ahead. It provides insights that can only be uncovered through this process. Instead of merely crossing it off a to-do list, it should be used as the strategic tool it really is. The old saying rings true here – How can you know where you’re going if you don’t know where you’ve been? 

If you’re struggling with your quarter-end close or reviewing your financials, we can help. At Agile Planners, we understand the many responsibilities that business owners have, and that their time is generally scarce. We can provide you with CFO, bookkeeping services, and training. As a one-stop shop to fill all types of accounting needs, we take over bookkeeping and accounting tasks, integrate technology systems for optimal performance, and provide consulting services to develop a strategic plan for your business to grow and reach its goals. We’ll take care of the nitty-gritty so that you can focus on the bigger picture: running your organization. Contact us today to learn more about how we can help you with your month-end close process.

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