Dear Dangerously in Love with Your Finances,
I own a membership fitness gym that offers members a hybrid in-house and online classes model in Atlanta, Georgia. I have an excellent relationship with my gym accountant; he is very responsive, organized, and easy to work with. I enjoy working with him, but sometimes I need help understanding some of the terminologies he uses for bookkeeping and accounting. For instance, he asks me to send my bank and credit card statements every month, as this is a part of his month-end close process. What exactly is a month-end process as it relates to accounting and finance?
A Little Lost on Accounting Terms
Hello, A Little Lost on Accounting Terms,
As an accountant specializing in bookkeeping and accounting for the health, wellness, and alternative medicine industry, I get this question more often than you think. Like all industries, the accounting field has quite a bit of terminology that can seem difficult to decode.
The Month-End Process and Product
The month-end process is what an accountant firm does at the end of each month to close the client’s financial books for that specific month/time period. Think of the month-end process as a set of activities performed to create a “product” which is delivered to you at the end of the month.
While I can’t answer for your accountant and his month-end process, I provide my clients with timely and accurate financial statements that reflect all of the client’s financial activities and transactions each month.
For The Body of Accounting, the end product is providing accurate financial statements within a reasonable time frame. Therefore, we implement multiple steps within our month-end close to deliver a product that gives value (reliable financial statements) to our clients.
However, some of these steps can only be completed with my clients’ assistance, including them sending supporting documentation (bank and credit card statements) on time. When my clients take a long time to send this documentation, it holds up the process, thus causing me a delay in delivering the financial statements.
Let’s break down what actually goes into a month-end process so you have a better idea of how your statements are used and what your accountant is specifically likely to be referring to in your communications about this process.
Typically a month-end process includes the following:
- reconciling balance sheets accounts (which is why the bank and credit card statement is needed)
- accruing expenses and revenue
- preparing financial statements
- closing the books/month
Now that you know more about what is involved in this process, I suggest taking a minute to think about the active role you play in it! If you haven’t already, create a consistent schedule you know you will be able to keep up with for sending statements every month.
And don’t forget – your accountant is there to help you, including with terminology! Please do not worry about asking for a little guidance from a paid professional you like and trust.
If you’d like to continue to grow your knowledge and learn more about useful accounting terms and practices, here are some articles I would recommend:
- 4 ways to invest in your fitness business now and write it off later
- Answers to the top 5 money questions of small business owners
- How and why KPIs are critical to your business success
- Are employee benefits tax deductible?
- Combining cash flow and discounts
If you have more questions, feel free to reach out to me again.