The Ultimate Month-End Close Checklist for Tech Companies

Jul 17, 2024

EARLY-STAGE-STARTUP-TAXES

Undertaking a month-end close serves your tech company in a myriad of ways. First, it ensures accuracy in your books. If you’re burning through your runway faster than expected, this regular check-in clues you into the issue early. 

Secondly, it gives you a clear view of both your current financial situation and historic trends. Looking back at past month-end closes can help you make strategic decisions that propel your startup forward. 

What’s more, a month-end close keeps your financial records in top shape so you’re always ready to respond to investors’ inquiries. 

Ultimately, you stand to gain a lot by implementing this once-a-month to-do. And we have a six-step checklist to help you make the most of it. 

 

#1: Get set up for success

The month-end close can feel like a big hassle if you’re constantly having to hunt down documentation or wait for people to respond to questions. To streamline this process, gather up the necessities before you dive in:

  • Bank account statements
  • Accounts receivable
  • Inventory totals
  • Outstanding vendor/supplier invoices
  • Petty cash totals (if applicable)
  • Expense receipts
  • Last month’s profit and loss statement
  • Last month’s balance sheet
  • Last month’s cash flow statement

Give all of these a quick skim. Doing so might reveal that a certain area needs your attention — or the attention of someone from your finance team — before you can effectively complete your month-end close. 

 

#2: Review and reconciliation

Now, put your balance sheet on top of the pile. It’s time to review and reconcile all of the accounts listed there, including:

  • Accounts receivable
  • Accounts payable
  • Bank accounts
  • Credit card accounts
  • Fixed assets
  • Liabilities

Go through each of these one by one and ensure that everything is properly recorded and reconciled. That means matching vendor invoices to your accounts payable, aligning credit card payments with their matching bank account withdrawals, verifying expense reports with the appropriate receipts, etc. 

If anything doesn’t line up, flag it. You might discover that a customer invoice hasn’t been paid as you go through your accounts receivable, for example. You can create a separate file or folder for action items you uncover as you perform reconciliation during your month-end close. 

 

#3: Record revenue 

The next step is to properly record all of your revenue and expenses for the month in question. 

As you do this, double-check that you’re recording things in the right period. If you’re using accrual-based accounting (which we recommend for most tech companies), your revenue recognition gets distributed across the appropriate time period rather than recorded as a lump sum on the date of payment. Keep your accounting method in mind as you work on your reconciliations. 

Don’t forget about your accruals here. These are revenue or expenses that haven’t yet been technically recorded in your books. If you’ve performed work for a client but they haven’t paid you yet or you bought something but haven’t fulfilled the invoice, that’s an accrual. Record accruals that will be paid to you as assets and accruals you owe as liabilities on your balance sheet. 

 

#4: Tackle assets and liabilities

Ideally, you should have a list of all of your tech company’s fixed and liquid assets. If you don’t, put some time on the calendar to make one. You can use this resource at each month-end close in the future.

Go through and reconcile fixed assets to ensure they’re appropriately captured in your accounting records. In many cases, that simply means accounting for depreciation (e.g., for company vehicles) or appreciation (e.g., for company real estate). 

Also, reconcile your intangible assets like intellectual property. In most cases, you amortize intangible assets over a 15-year period. 

As part of your month-end close, go over your liabilities, too. Review any loans and leases to ensure you’re on top of repayment and that the repayment schedule is moving forward as expected. 

 

#5: Take steps to improve next month

You can turn your month-end close into a tool that propels your company forward. Look for ways to bring in revenue or reduce/eliminate costs as you go through this monthly review process. 

For example, many tech companies benefit from using the month-end close to:

  • Identify outstanding invoices and make a plan to collect on them
  • Evaluate inventory and make a plan for shortages or excess
  • Identify and retire fully depreciated or otherwise obsolete assets

Your accountant can give you tips to make the most of your month-end close based on your business model and your company’s current stage. 

 

#6: Dial in your financial reports

The month-end close isn’t just a box you tick. It’s a way to generate the financial reports your tech company needs to satisfy investors, comply with regulatory requirements, and stay on top of its financial status. 

By the time you complete this process, you should have an updated:

  • Profit and loss statement (showing where money’s coming in and going out)
  • Balance sheet (capturing all of your assets and liabilities)
  • Cash flow statement (recording transactions and your cash balance)

If creating those financial reports sounds overwhelming, it’s probably because you’re not doing it frequently enough. A month-end close ensures that you’re keeping things updated when the data is fresh and readily available. It clues you into issues before they have the chance to grow. And it keeps you informed about financial situations that are already developing or likely coming down the pipeline. 

All of this helps you best position your tech company for success. And getting that kind of clarity on a monthly basis helps you stay the course or pivot when necessary. 

Plus, when you’re doing the work to create key financial reports on a monthly basis, you get familiar with the required steps. This makes the process faster and easier while keeping you in the know about which financial data sources you need. 

Ultimately, a month-end close helps you keep your books accurate and your company on the path to success. It ensures you’re ready for requests from investors, external auditors, tax authorities, and more. And the more you do it, the easier it gets. 

That said, that first month-end close can be a big lift — especially if your company hasn’t been regularly evaluating its financial data and reporting. We can help. As accountants specializing in working with tech companies, our team comes alongside you to navigate your month-end close. What’s more, we can develop a process to make it easier in future months. To learn more, get in touch.