Keys to Success in the Office

Above, we mentioned that it’s best that each organization has a desired date for closing the books. There are many pieces of information that need to be entered in both ServiceTitan and your accounting software, so it’s best to put a timeline together for each task it takes to close so that you can see if you are on pace. 

The month-end process starts before the 1st of the following month.  Most of your vendors will start sending statements on the 27th or 28th, which will contain all of your purchases for the month as well as any open AP bills.

Here’s a quick way to organize a timeline, based on BUSINESS DAY. Most companies want to close by the third or fourth day of the month, but with weekends, it’s best to close by the third or fourth business day. We will do a fifth-business-day close for this example:

Pre-Month end close = Day <1 

• • Start to reconcile vendors through the statement date.

  • Perform a backup of your QB file (if applicable).

  • Start paying reconciled vendors.

Day 1 (typically on the 1st)

• • Gather any current transactions from vendors who close prior to the first.

  • Collect all prior month AR payments and make sure they are entered and exported.

  • Start entering POs/AP that are current but are in the prior month.

  • Enter any withdrawals and payments from the prior month.

  • • Typically entering transactions from Credit Card statements in the prior month.

    • Also may need to verify printed checks/ACHs are recorded properly.

  • Record Fixed Journal Entries

  • • Depreciation and Amortization

Day 2

• • Balance the Bank/Reconcile bank account

  • • Check off all deposits and withdrawals.

    • Post any bank fees.

    • Settle any variances.

    • DISCLAIMER: Depending on the size of your business, it’s best to reconcile at least weekly, if not daily.  If you wait to reconcile your bank account until the end of the month for the whole period, you may lose sight of your cash position.  You may see unexpected transactions that need answers as well.

  • Check to see if there are any open POs that may not have been received yet/waiting on the vendor.

  • • If there are unrecognized expenses that are supposed to be in the prior month, create an entry for an accrual.

    • • This accrual can be an estimate that will help align expenses to the associated revenue.   

      • If not done, it could inflate an expense and throw it off a budget for a month that is incorrect.

  • Record Prepaid Expenses

  • • These expenses are purchased up front but may have been used over time.  

    • Some companies spread this over 3, 6, or even 12 months depending on how long it’s being used.   

    • Typically used for non-Amortized items.  

    • Can help keep a monthly budget for that GL account on track by spreading the expense.

  • Run reports

  • • Make sure all ‘checks’ or ‘cash’ dated in prior month are not considered “pending.” Need to post these ASAP or change the paid-on date.

    • Run an AR Report by detail.

    • • Prepare for any customers who are overdue.

      • If using terms, consider ST’s Payment Terms feature to help understand what’s really due versus what’s still current.

    • Start reconciling income and expense accounts in ST.

    • Run a deferred revenue report and track the balances between ST and your accounting software.

    • • Only applies to those trades who do not record revenue with memberships at time of sale/renewal/billing.

Day 3

• • Post any warranty reserve journal entries.

  • • If you don’t record in the system per job, companies tend to take a flat percentage based on revenue numbers for that month and reserve it for any warranty liability.

    • • Typically 2-4 percent of Install Net Revenue Dollars.

  • Call any overdue customers past 30 days.

  • • Ones that have not paid that have received 3-4 statements.

    • Consider sending to collections or writing off bad debt.

  • Reconcile any inventory variances.

  • • Compare the two systems and true up the inventory asset after performing any cycle counts/full inventories.

  • Close the books on the Operations side.  

  • • Often called a ‘Soft Close’

    • This is based on updating the ‘Minimum Posting Date’ for each Business Unit (Active and Inactive).  

    • This will prevent any transactions posting to a ServiceTitan batch.   

    • • Assuming all above steps are taken and invoices/payments were sent over prior.

  • Perform any remaining Balance Sheet reconciliations.

  • • Accounts Receivable

    • WIP (Work in Progress)

    • Prepaid expenses

    • Any payroll entries (accruals)

Day 4

• • Run a first pass income statement.

  • • Budget vs. Actual (overall and by class)

    • Actual vs. last month vs. prior year

    • Actual by class (side-by-side)

    • Spot any variances and research

  • Run a first pass balance sheet.

  • • Spot any anomalies

    • • Typically shows up in inventory, cash, or accrual liabilities.

      • Make sure AP is tied out.

    • Perform any changes.

  • Run AR statements

  • • Option 1: Run in Service Titan using the AR Management module.

    • Option 2: Run in Accounting software, post Interest fees.

    • DISCLAIMER: Posting Interest fees based on payment due dates are not automated as of 8/2020 but will be on the roadmap.  If you decide to perform this in the accounting software, it will throw off the AR balance between the two systems.  You can post adjustment invoices on each overdue invoice to reflect it (after the fact) that matches the same GL account as the interest fee expense.  However it’s very manual at this point.

  • Verify all Overhead bills have been entered into ST or Accounting side.

  • • Rent, Marketing, Insurances, etc.

  • Pay any overhead bills that are overdue on AP. 

  • • This can be done at any time based on cash position or it can be seasonality.

    • If cash is available, take advantage of any discounts for paying on time.

Day 5

• • Review Financials with each department manager.  

  • • This should be a more final draft and each manager should have received a first pass for his/her respective department.

    • Make any changes if necessary.

  • Review Financials with the board/executives.

  • • Spot-check any anomalies from prior periods and vs. budget.

  • Close the books in the accounting software. 

  • • Can be called a Hard Close.

    • Only can be unlocked by an Admin.

Although this is a very high-level example of a month-end timeline, having a hard deadline will ensure that the business follows a plan and closes the books not only timely, but with higher accuracy.