Another year has come and gone, and many local government finance departments have just completed, or are still in the process of enduring, yet another dreaded year-end close! While it is never an easy feat, one of the best ways to guarantee that your year-end close goes as smoothly as possible, is to implement a strong month-end close process. Having a documented checklist, with deadlines and assigned responsibilities, similar to what most agencies already use for year-end, can help you to break down the annual reconciliations and any necessary corrections into small, manageable tasks. Many of the year-end reconciliations can be done more efficiently on a monthly basis, as it’s a lot easier to remember what transactions happened a few weeks ago, as opposed to several months ago. With most year-end closes coming to an end, now is the perfect time to implement a monthly process going forward.
Best Practices
Here are some best practices to consider as part of your checklist now, to facilitate a better close for 2023-24:
- Revenues: Verify monthly payments (such as sales tax, property tax, TOT, gas tax and RMRA payments) are received and posted to the correct accounts throughout the year. It is an easy way to confirm that all amounts are being received timely and are coded to the correct accounts.
- Accounts Receivable: Reconciling GL accounts to the A/R subsidiary ledgers on a monthly basis can help you identify any balances are that are incorrect or any long outstanding items that should be cleaned up and written off. Reviewing the AR Aging for any unusual balances can also help to catch any irregularities as they occur.
- Accounts Payable: Confirming that the AP balances are $0, on a monthly basis, will help identify any prior year reversals that may have been missed or any potential errors with any invoices that are not clearing properly. Any balances in the GL should tie to the AP module.
- Accrued Payroll liabilities: Implementing a monthly reconciliation process for your payroll liability accounts, to verify that deductions and payments are properly matching up is a great way to identify issues (such as payments being made for benefits of employees that have separated, or incorrect deductions) early on. Many organizations also have issues with deductions and the corresponding payments posted into separate accounts, which can be detected and corrected more efficiently when reviewed on a monthly basis.
- Other Payables: Performing a regular review of other liability accounts, such as Retentions and Deposits Payable to ensure that the accounts are being properly tracked and the account balances are correct.
- Fund Balance/Net Position: Confirming that your beginning balances agree to the prior year ACFR and any changes posted to equity accounts are accurate and tracked on a listing of restatements. This is often a step that some organizations forget and can lead to questions or issues with your audit.
- Interfund Activities: Establishing a process for reconciling the due to/due from and transfer accounts throughout the year is a great way to ensure that these accounts are properly in balance, at all times.
- Reviewing Miscellaneous Revenue and Expenditure Accounts: These accounts are a dumping ground for transactions without a home. Reviewing these accounts monthly can help clean up these accounts and post transactions in the correct accounts, thus reducing the time it takes to reconcile at year end.
Conclusion
Implementing month-end close procedures now can help your agency save precious time at year-end. While there may be some areas that require cleanup at first, once setup properly, these monthly processes will ensure that your annual close is as easy as possible. If you are finding that you, like most organizations, have limited resources and need support implementing these processes, LSL can serve as a resource to your finance team. Reach out to LSL today!
