When you want to change your diet to achieve better health, it’s helpful to start by getting on the scale. If you don’t do this, it’s difficult to determine if what you’re doing is actually working. To really be proactive, you should get on the scale regularly and consistently so you can adjust your behavior based upon the results you see. The scale is a barometer of performance.
Much like a scale, financial data is a barometer of performance for financial health. It tells you what your organization has done right, where it has gone wrong, and where it needs to improve. To maximize its effectiveness, it must be reviewed regularly and consistently so decisions can be adjusted as needed along the way.
In the best environment, a regular and consistent review occurs monthly, but before that can happen, the data needs to be reviewed and confirmed by way of a monthly–close process.
Key Takeaways:
- The month-end close process catches risk, ensures compliance, and checks financial accuracy.
- This process should result in financial reports that help inform leadership’s decision-making.
- The process resembles audit preparation and includes a number of financial documents.
- Accounts payable management is a vital part in understanding the full picture of your organization’s financial position and informs strategic planning.
- Using a checklist will lead to a more efficient, effective month-end close process.
Why a Monthly-Close Process
Throughout each month, hundreds, if not thousands, of financial transactions will be entered into the accounting system. Most of those will be done manually and even the best of employees will occasionally make mistakes. The monthly close process is designed to find and correct those mistakes and, further, to ensure financial accuracy and compliance with Generally Accepted Accounting Principles (GAAP).
In a nutshell, it’s an important part of the financial cycle where all transactions are accounted for, balances are verified and adjusted if necessary, and financial records are checked for accuracy.
When Should It Happen?
The monthly close is nothing more than a review and cleanup of financial data before it is presented to the decision-makers in the organization, whether they be the Board, senior management, or budget managers. Because of its importance in decision-making, it should be done in a timely manner. A September monthly close that doesn’t happen until January provides data too late to maximize its effectiveness on operations. A good rule of thumb is that the month-end close should be done by the 15th of the following month (for example, January should be closed by February 15th).
When performed each month, it does not have to be difficult or time-consuming; it will additionally position the organization well for year-end audit readiness. Just like any other business process, it should be formalized and documented with all tasks clearly assigned to the accounting team and finance teams to ensure collaboration and accountability.
What Should a Month-End Close Process Include?
A good month-end close resembles audit preparation. It starts with the Statement of Financial Position. Almost every account should be reconciled to something. For example (and the following is by no means an exhaustive list):
- Perform a bank reconciliation by comparing internal records to bank account statements to ensure accuracy.
- Accounts receivable should be reconciled to the accounts receivable aging and any uncollectible balances should be written off.
- Contributions or pledges receivable should be reconciled to records maintained by the organization’s fundraisers.
- Investments should be reconciled to monthly investment statements.
- Fixed assets should be tied out to the fixed asset subsidiary ledger, which is often an Excel spreadsheet listing all fixed assets. Write-offs or disposals should be recorded as appropriate. Assets should be properly depreciated, and depreciation expense should be recorded.
- Accounts payable should be reconciled to the accounts payable aging, which should be reviewed for any unused credits. Invoices dated in the month being closed should be recorded in that month and not in the following month.
- Loans and leases should be tied to statements and/or amortization schedules. Interest expenses should be properly booked.
- Reconcile balance sheet accounts, cash accounts, prepaid expenses, and accrued expenses.
Once that is completed, the Statement of Activities should be reviewed for reasonableness.
- Revenues should be compared to the previous month and/or to budget. Unusual variances should be investigated and understood.
- Expenses should be compared to the previous month and/or to budget. Unusual variances should be researched and understood.
- Repair and Maintenance expenses should be reviewed for those that should be capitalized.
- Payroll expenses should be reviewed for proper cutoff and reasonableness of employer payroll tax expenses.
- Verify supporting documentation such as expense receipts to prevent discrepancies and maintain financial records.
During this process, it is helpful to work closely with budget managers. If they are questioned about large or unusual variances, they can bring an understanding to these or maybe even help to uncover errors that were overlooked because, most certainly, senior management and an engaged Board will ask the tough questions.
The final step to a month-end close is to produce financial reports that bring value to the decision-making process.
Typically, these include:
- Statement of Financial Position
- Statement of Activities
- Budget to Actual Variance Report
- By implementing a proper and regular monthly-close you will help to ensure the data you are using each month to make management and leadership decisions is both accurate and timely.
A well-executed month-end close process provides a strategic advantage, supports cost savings, and enables the use of key performance indicators to analyze the company’s financial performance.
Accounts Payable Management is Vital to Your Month-End Close
A strong accounts payable (AP) process is essential to an accurate, timely month end close. For nonprofits, it ensures that all expenses are properly recorded, liabilities are satisfied, and cash obligations are clearly understood before financial statements are finalized.
When AP is inconsistent or delayed, leadership may be reviewing reports that don’t reflect the organization’s true financial position, and that has real consequences. Month-end close reports drive budget oversight, cash flow planning, and stewardship of donor and grant funds. A disciplined AP process supports a smoother close, reduces surprises, and gives leadership confidence that decisions are grounded in complete, reliable information.
Why a Nonprofit Accounting Close Checklist Matters
When teams follow a comprehensive checklist, they reduce risk, strengthen audit outcomes, and provide leadership with accurate information to inform strategic decisions. A checklist acts as a road map to ensure critical steps are followed, nothing is overlooked, and issues are caught early before they become a problem. With a consistent process in place, your team can close with confidence and stay focused on your mission.
Gain Confidence From a Solid Month-End Close
Ultimately, the month–end close is more than a routine accounting task. It’s a critical management process that gives nonprofit leaders the clarity and confidence they need to make informed decisions. When the close is timely, accurate, and repeatable, leadership can trust the numbers, strengthen accountability to stakeholders, and stay focused on mission impact rather than financial uncertainty. If your organization is struggling with delays, inconsistent processes, or limited insight from its month–end close, our financial experts at Chazin can help.
Updated on 03/19/2026
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Chazin
With over 20 years working exclusively with nonprofits, we pride ourselves in having a unique understanding of nonprofit accounting needs. We believe that nonprofits deserve personalized, quality service and should not settle for a one-size-fits-all approach. We collaborate with you to provide a fully virtual and customized solution that is not only cost-effective but also strengthens your accounting function. We offer a team of industry experts at your disposal to provide advice, leading technology, and to supplement existing staff to improve efficiency and compliance.