Month-End Close SOP Template

1.Purpose

To close the accounting period accurately and on schedule, with complete accruals, reconciled balance sheet accounts, and financial statements management can rely on.

2.Scope

Applies to the recurring monthly close process across all general ledger accounts. Bank reconciliation and payroll processing have their own detailed SOPs and are referenced here as inputs to the close.

Definitions

Cutoff

The point at which transactions are assigned to the closing period versus the next period.

Accrual

A journal entry recording revenue earned or expense incurred in the period even though cash has not yet moved.

Flux analysis

Comparing account balances to budget or a prior period and explaining significant variances.

3.Responsibilities

Staff Accountant

Posts accruals, reconciles assigned accounts and prepares supporting schedules.

Senior Accountant

Reviews reconciliations, prepares the flux analysis and coordinates the close calendar.

Controller

Reviews the close, approves adjusting entries and locks the period.

CFO

Reviews final financial statements and significant variances with the controller.

RACI matrix

R = Responsible, A = Accountable, C = Consulted, I = Informed

4.Materials and PPE

Materials, tools and systems

• →Close calendar and task checklist
• →General ledger system
• →Account reconciliation templates
• →Accrual and adjusting entry workpapers
• →Flux analysis template
• →Financial statement package

5.Procedure

1. 5.1

   Publish the close calendar

   Senior Accountant

   The senior accountant publishes the close calendar for the period, listing task owners and deadlines for subledger cutoff, accruals, reconciliations and review.

2. 5.2

   Close subledgers and confirm cutoff

   Staff Accountant

   The staff accountant confirms accounts payable, accounts receivable and payroll subledgers are closed for the period, following their respective SOPs, and that no late transactions are missing cutoff.

   Checkpoint: Subledger totals used for close match the final accounts payable, accounts receivable and payroll reports for the period.

3. 5.3

   Prepare and post accruals

   Staff Accountant

   The staff accountant prepares accrual entries for revenue earned or expenses incurred but not yet recorded, such as unbilled services or received but uninvoiced goods, with supporting calculations.

4. 5.4

   Reconcile balance sheet accounts

   Staff Accountant

   The staff accountant reconciles assigned balance sheet accounts, including cash, prepaid expenses and accrued liabilities, tying the general ledger balance to supporting detail.

   Checkpoint: Every balance sheet account has a reconciliation with no unexplained difference before the close proceeds.

5. 5.5

   Review fixed asset and depreciation entries

   Senior Accountant

   The senior accountant confirms the monthly depreciation entry from the fixed asset register has posted correctly and matches the fixed asset subledger.

6. 5.6

   Review intercompany transactions

   Senior Accountant

   The senior accountant reviews intercompany charges and balances for the period, confirming they are recorded consistently on both sides and net to the expected amount.

7. 5.7

   Run preliminary financial statements

   Senior Accountant

   The senior accountant runs preliminary income statement and balance sheet reports from the general ledger system once accruals and reconciliations are substantially complete.

8. 5.8

   Prepare the flux analysis

   Senior Accountant

   The senior accountant compares account balances to budget and the prior period, and documents an explanation for any variance above the threshold set in the close calendar.

9. 5.9

   Review and approve adjusting entries

   Controller

   The controller reviews proposed adjusting entries and the flux analysis, questions any unclear variance, and approves the final adjustments before the period is locked.

10. 5.10

    Hold the management close review

    Controller

    The controller and CFO review the final financial statements and significant variances together before the statements are distributed outside the accounting team.

11. 5.11

    Lock the period

    Controller

    Once the review is complete, the controller locks the accounting period in the general ledger system so no further postings can be made without a documented reopening.

    Warning: Reopening a locked period should require documented approval, since it affects reported results that may already be distributed.

12. 5.12

    Distribute financial statements

    Controller

    The controller distributes the final financial statement package to management according to the standard distribution list and close calendar deadline.

13. 5.13

    Archive close documentation

    Staff Accountant

    The staff accountant archives reconciliations, accrual workpapers and the flux analysis in the document management system, organized by period for future reference and audit support.

6.Quality checks

• →Every balance sheet account reconciliation is complete with no unexplained difference.
• →Every flux variance above the threshold has a documented explanation.
• →The period is not locked until the controller has approved all adjusting entries.
• →Close documentation is archived by period before the next close cycle begins.

7.Records

• →Close calendar and task tracker
• →Account reconciliations and supporting schedules
• →Accrual and adjusting journal entries
• →Flux analysis and final financial statements

8.KPIs

• →Number of business days to close the books
• →Number of reconciliations completed on time versus late
• →Number of adjusting entries posted after the preliminary statements
• →Number of unexplained flux variances at final review

9.Common mistakes

• →Reconciling an account to a number that does not tie to supporting detail.
• →Missing a subledger cutoff and recording a transaction in the wrong period.
• →Skipping the flux analysis on accounts that look routine.
• →Reopening a locked period without documented approval.

10.Revision history