AppFolio month-end close checklist: six steps, in order

You have just recently moved to AppFolio, and you need a month-end close checklist to build your own process from. What belongs on it, and in what order?

The short answer is six steps. Reconcile the bank account up to date, clean up the Diagnostics page, run management fees, enter the vendor bills that are due, pay bills only where funds are available, and then reconcile through the end of the month and close the accounting period. This is the recommended order for an AppFolio month-end, and each step is explained below.

The six steps

1. Reconcile the bank account up to date (don't finalize, just save). Do this even if it is not the end of the month, and even if the bank statement is not available yet. This is the bread and butter of healthy books.
2. Clean up the Diagnostics page. You find it under Accounting > Diagnostics. Clean up any mismatches on this page. It should be completely clean before each month-end close. Make any transfers that are needed to correct the balance in your Security Deposit Cash account.
3. Run management fees twice. Run them as of End of Last Month under Accounting > Pay Management Fees, and post those bills. Then run the function again as of today, even if you have already run it once.
4. Enter the vendor bills that are due. Work out whether you have any remaining unpaid invoices to vendors that are due, and enter those bills into AppFolio. If a property does not have enough funds, check whether the owner has additional funds on another property and use the function under Accounting > Payables > Transfer Owner Funds to reallocate the funds. If the owner does not have the money, send an owner packet by typing Send Owner Packet in the main search bar. The packet will show the owner that they need to make a contribution, and how much.
5. Pay all outstanding bills. Select "If Funds Available" rather than "All", so that you do not risk overdrafting your bank account.
6. Reconcile through month end and close the period. Once the statement is available, reconcile the bank account through the end of the month. Complete your Three Way Reconciliation form if your state requires it. Then close the accounting period, which is found under Bank Accounts/Financial Accounts > Close Accounting Period.

Why the order matters

The bank reconciliation comes first because it tells you what money has really moved. If the books do not yet match the bank, every later transaction calculates funds based on unreconciled transactions, which could be inaccurate.

The Diagnostics page comes second for a similar reason. A mismatch that you leave outstanding could lead to under or over paid owners, and under collected management fees.

Management fees and vendor bills are entered first because you cannot judge what a property can afford until all of its costs are entered. This is also the moment when a shortfall shows up. You then have the two options from step 4: move the owner's funds from another property, or ask the owner for a contribution with an owner packet before finalizing the payments.

Paying with "If Funds Available" is the safeguard against overdrafting the bank account. The money in that account belongs to owners and tenants, so an overdraft is a serious matter and not only a bank fee.

What closing the period does

Closing the accounting period prevents people from unreconciling transactions or editing items in the prior period. Such changes would alter the owner's statements and could throw the reconciliation out of balance.

This is why closing the accounting period is the last step. An owner statement that has been finalized should remain the same, any changes would be made in the current period. If someone later edits a transaction in that month, the statement the owner holds no longer matches your books, and the reconciliation you finished may have to be done again.

A three-way reconciliation, in general terms, compares three figures: the reconciled bank balance, the balance in your books, and the total you hold for owners and tenants. If your state requires the form, complete it before you close the period and attach it under the Bank page > Attachments. We suggest creating a folder for the TWR forms, specifically.

What to do between closes

Reconcile your bank account daily, or weekly at a minimum. This way you record all transactions that are clearing your bank, and your properties reflect what is actually available in the bank.

Frequent reconciling also makes the end of month process run smoothly. A difference found the day after it happens takes minutes to explain. The same difference found four weeks later can take an afternoon.

Who should own the checklist

Give each step a named person and a due date. In a small office one bookkeeper may do all six steps. In a larger office it is common to split the work: one person reconciles, another enters and pays bills, and a manager reviews the Diagnostics page and closes the period.

Write down the date on which each step was finished. After the close, check three things. The reconciliation is complete through the last day of the month. The Diagnostics page is clean. No bill was left unpaid without a note that says why.

APM Help's consultants assist with end of month close outs. If you're unsure about your processes, we can take a quick look over your account and tell you what is needed to get things back on track in a 30-minute call.