Performing month end closing will keep you from getting behind in your bookkeeping. Leaving things open or unresolved for a few months or even until the end of the year can lead to problems. You might forget to reclassify transactions that need correcting or you might have failed to enter them in the books in the first place!
It can be a sure sign to clients that you aren’t doing your work on time if you are presenting them with a large list of questions at the end of the year. A client may also ask you for a profit and loss statement for a certain period of time. It would prove to them that your work is being done on time if you can provide that statement right away.
A good way to keep things from piling up is to keep your workflow going smooth to take care of things as they come up. For example, you may have a list of transactions you need help classifying. Instead of waiting until the end of the year to give your client a list, why not give them one at the end of each month?
It is actually a best bookkeeping practice to close the books each month. This means that you should have all accounts reconciled and all transactions classified correctly. Another good practice is to give your client copies of their financial reports after the end of each month.
Definition of month end closing
Doing a month end closing does not mean having everything finished by the last day of the month. Reconciliations have to wait until the bank and credit card statements are available. Statements usually aren’t available until the first day of the month following. And if you only have access to statements sent by your client, you are normally working on the previous month. For example, if it is October, you are working to get the September books complete by the end of October.
The main point is to keep from going more than one month without reconciling and making sure everything is complete. If you do this, you will have a much easier time at the end of the fiscal year getting the books finalized for taxes.