A month-end close checklist for finance companies

A month-end close confirms that every transaction dated in the month has been recorded, that cash, bank, loan and deposit balances agree with the records behind them, that the month’s accruals and provisions are posted, and that the month is then locked so nothing more can be dated in it. For a finance company the checklist runs in a fixed order: cut-off, tills and cash, bank reconciliations, the loan book, savings and deposits, accruals, provisions, clearing and suspense accounts, the trial balance, the statements, and finally the close itself, approved by a second person. The order matters, because each step relies on the ones before it.

Before the first month: decide what “closed” means

A close is only as good as its definition. Agree these once and write them down:

The cut-off. Which business date the month ends on, and what happens to a collection keyed in on the 1st that was taken on the 30th. The answer should be “it is dated the 30th, and it goes in before the close”, not “it goes into next month”.
The calendar. If the last day of the month is a Poya day or another holiday, branches are shut but the month still ends. Decide whether the close starts on the next working day.
Who owns each task, by role rather than by name, so that the list survives a resignation.
The target day. How many working days after month end the management accounts are due. Pick a number the team can meet, then shorten it.
Whether the checklist is advisory or binding. In other words, whether the period can be closed while a task is still open.

1. Cut-off: everything dated in the month is in

Every branch has keyed in its receipts and payment vouchers up to the last business date.
Every centre collection sheet for the month has been keyed back in, and the cash each officer counted matches the batch.
Disbursements made in the month have been posted, and none is waiting at a gate.
The approval queue has been read. Anything still pending is either decided or consciously carried into next month, with a note.
The receipt and voucher number series have no unexplained gaps.

2. Cash: every till counted and closed

Every till has been counted by denomination at the end of the last business day, and closed.
Every difference, short or over, has been posted and signed by a manager, with a reason.
The safe has been counted, and the transfers between the safe and the tills during the month net off.
The cash-in-hand balance in the ledger, branch by branch, equals what was counted.

3. Bank: every account reconciled

A statement has been obtained for every bank account for the whole month.
Each statement line is matched to a ledger posting, or explained.
Bank charges and interest credited by the bank have been posted by journal.
Items the books hold that the bank has not yet seen, such as cheques deposited on the 30th, are listed and are the only difference.
The opening balance of this month’s reconciliation equals the closing balance of last month’s. A reconciliation that starts from an unreconciled balance proves nothing.

4. The loan book agrees with the ledger

The total outstanding principal in the loan system equals the loan portfolio account in the ledger, branch by branch and product line by product line.
Disbursements for the month equal the payouts through the bank and the tills.
Every repayment has been allocated to the loans it paid. Anything that could not be allocated is investigated, not left in a holding account.
Overpayments are held as a liability and have not quietly reduced principal.
Fees charged in the month are in fee income, and fees deducted at disbursement match the disbursement entries.

5. Interest accrual: income in the month it was earned

On an accrual basis, interest earned but not yet collected up to the last day of the month is posted to income, and the accrued interest receivable agrees with the loan system.
Loans that have stopped accruing because they are too far overdue are listed, and what happened to the interest accrued before they stopped is as the policy says.
Penalties charged in the month are in penalty income.

6. Arrears, provisions and write-offs

The loan book is aged as at the last day of the month, and portfolio at risk has been worked out by branch and officer. See how to calculate PAR30.
The provision has been computed from the institution’s own ladder and posted as at month end. Only the change against last month’s provision should post.
Write-offs for the month were approved before they were posted, and recoveries on loans written off earlier are booked as income, not as a restored receivable.

7. Savings and deposits

The total of passbook balances equals the savings control account.
Interest earned on savings in the month is accrued, or posted if the month is a posting month.
Fixed deposits that matured in the month have been paid out, renewed or held as the customer instructed.
Dormant accounts and any fees charged on them have been reviewed.

8. Clearing and suspense accounts

Clearing accounts should be empty at month end. A balance on one is always a finding.

The inter-office clearing account nets to zero across all branches taken together.
Any transfer clearing account used for money moved between accounts is at zero.
Suspense and unallocated-receipts accounts have been worked down, and every remaining item has an owner and a date.

9. Other accruals and adjustments

Expenses incurred but not invoiced, such as utilities, rent and professional fees, are accrued.
Payroll and any statutory deductions are posted.
Prepayments are released for the month, and depreciation on fixed assets is posted.
Every manual journal carries a description a stranger could understand, and was approved by someone other than the person who raised it.

10. The trial balance

Total debits equal total credits, for the institution and for every branch.
Every account’s balance has the expected sign. A liability with a debit balance, or cash in hand below zero, is an error to find now.
Each account’s movement for the month has been compared with last month and with budget, and large or unexpected movements are explained.

11. The statements and the management pack

The balance sheet and income statement are produced from the trial balance, not retyped from it.
Every account in the trial balance appears on a statement line. An account that no line covers is a figure missing from the statements.
The management pack is assembled: portfolio at risk by branch, repayments due against collected, officer performance, deposits, and cash.

12. Review, sign-off and close

A second person reviews the checklist, the reconciliations and the statements.
The period is closed, with approval from someone other than the person who prepared the close.
From that moment, nothing can be dated in the month. A correction found later is posted in the next open month as a new entry that references the original, or the month is formally reopened. Reopening is an event the audit trail should show, with who asked, who approved and why.

At the year end, add three steps

Carry forward the result. Income and expense accounts are closed to retained earnings, so the new year’s income statement starts at zero and the balance sheet still ties.
Leave room for the auditor’s adjustments. Adjustments agreed after the year end belong to the old year. Most ledgers handle them in a special period after the last month.
Run the carry-forward again after any adjustment, so that retained earnings reflect it.

How Fused handles this

The checklist is in the system. An institution defines its own ordered list of closing tasks, each with a description, an optional responsible role, a link to the screen it concerns and a due day relative to the period end. Each tick records who and when. A setting decides whether every task must be done before a period can close. See accounting.
Closing is locked and gated. A period cannot close while an earlier one in the same year is open. Closing and reopening are both approval-gated, and any posting dated in a closed period is refused, naming the period. Periods close for the whole institution at once, not branch by branch.
Nothing posted can be edited. An entry balances or it is refused, in the application and again in the database. Corrections are reversals, linked to the original and made once.
The trial balance, account ledger and statements are derived from postings, never stored, and a statement layout names any account that none of its lines covers.
Tills and bank. A till is counted by denomination and closing it posts only the difference, which an approval flow can require a manager to sign. Bank statements import from MT940 or CSV and are matched against the ledger. See branch counter.
Accruals and provisions. A nightly run accrues interest, charges penalties, stops interest on loans that are not paying and classifies each loan on the institution’s own ladder. The provision is posted for a date a person names, unless the institution chooses to post it nightly, and a run posts only the difference. Every step is safe to run twice. See arrears and provisioning.
Year end. The carry-forward to retained earnings posts one entry per branch and currency, and running it again after an adjustment posts only the difference. Opening balances for go-live are entered per branch and currency, with the contra amount computed.

To see a month closed on your own chart of accounts, book a walkthrough.