The accounting month end close process requires close attention to detail and organisation. It’s your business’ data and processes that enable your accounting team to create financial statements and understand your company’s financial health accurately.
Along with a month-end checklist, we’re going to share some month-end close best practices and see how automation tools can transform the complex and time-consuming process into a breeze.
The accounting month end close process is when accounting departments collect and file financial information for review for month end reporting.
The process consists of checking that all books are closed so that records are sealed thereafter. While the most important month end close process happens at the end of the fiscal year, how companies perform their accounting month end close process throughout the year will impact the final closing period.
During the process, teams will review transactions, journal entries, and reports. They will reconcile accounts to make sure everything is aligned and right.
The process is essential for businesses to understand and maintain a healthy cash flow, aid in making strategic business decisions, and assess progress towards business goals.
For some companies, the accounting month-end close process is required and regulated. But, even for companies that are not publicly traded, reviewing month end closing entries results in:
Since the process entails access to the following items, it can end up taking some time when performed manually.
For most companies, this process takes at least 2 weeks. From data sourcing to collection to transaction matching, making updates, and creating reports, it can be very time-consuming, repetitive, and stressful.
However, most companies have adopted financial automation software to alleviate the burden on the accounting department, provide greater transparency for stakeholders, save time, and reduce errors.
Financial close automation software such as SolveXia helps finance teams automate processes at scale, and with the low/no-code solution, you can be up and running immediately.
With SolveXia, you will be able to connect to multiple systems (which is extremely useful when you have high transaction volume and/or multiple payment providers), increase your process’ and data accuracy, and streamline workflows.
Whether you’ve been part of your own fair share of the accounting month-end close process or it’s your first time, you’ll benefit from having a month end close process checklist. This way, you won’t let anything slip through the cracks.
With access to this checklist, you can also set up your automated workflow in your tool of choice so that the software system will cover all the bases.
The checklist includes:
As you can see, there are a lot of moving parts. Each of these categories require immense data and close attention to detail to carry out the tasks involved. If your accounting team is executing the accounting month-end close process manually, this will slow down the organisation. Data collection in itself can take days, especially if your team is stuck having to transform data for comparison’s sake.
With an automation tool like SolveXia, you gain access to a centralised repository for all your data and systems, including legacy systems. The intelligent software automates data preparation, transforms data, and offers advanced analytics and data governance.
Using the drag-and-drop functionality, it’s easy to visualise and build workflows in minutes. Through automated reconciliation and data transformation, you’ll always be able to review your financial health in real-time with up-to-date information.
With your month-end close checklist in hand, you’re ready to get going on your month-end closing process in accounting. You can manage the process by following these steps or by setting up an automated workflow in your automation solution:
The income summary is used temporarily. For the accounting month-end close process, you’ll start by transferring all balances across revenue accounts to the income summary.
Then, you’ll close expense accounts. Once this is completed, the balance in the account is your net income for the period.
The balance needs to be closed to retained earnings to keep track of your cumulative earnings, since the income summary is temporarily used.
If you have any dividends or distributions for stakeholders during the period, you’ll need to close them out to the retained earnings. This way, the balance will be reflective of the earnings that the company needs to hold onto for future needs.
While every company follows these steps, everyone has their own distinct process and tools being used. To keep everyone on the same page and workflows streamlined, here are some best practices to keep in mind during your next accounting month-end close process:
Review how long your month-end close process is currently taking your accounting team. Set a goal for next month’s timeline in terms of days or the amount of time you’d hope it would take optimally.
While speed is an important factor, it won’t be worth the time savings if there are mistakes. Keep quality at the top of mind so you can reduce fraud and errors.
Before the close, bring your team together so that everyone is aware of their responsibilities and the set timeline goal. It’s also worth it to ask your team members what their pain points were during the previous close process so that you can rectify them.
The use of finance automation tools like SolveXia will streamline your workflows to save time while achieving an error-free process. Wherever possible, implement automation and technology to make the process simpler for everyone involved.
82% of accountants agree that the month-end close process tends to be a negative experience. (It doesn’t have to be this way!)
When performing the accounting month-end close process manually, you’re likely going to run into some common hurdles and have negative sentiments about the required tasks.
Some of the recurring pitfalls of a manual accounting close process include:
Remember when we said that the accounting month-end close process doesn’t have to be a negative experience?
We meant it. Automation software solutions remove the difficulties associated with the various steps. With an automation solution, you’ll be able to benefit from:
With finance automation, your staff no longer has to spend time on repetitive and monotonous data entry and transformation tasks. They’ll be able to gain more time back in their day and also allocate their energy to high-level and strategic tasks.
Manual account close processes add up when you require extra hours from your staff. Automation tools streamline the process and remove the key person dependencies.
A human being is prone to making manual mistakes, but automation solutions are wired for accuracy.
When automating the account close process, you can rest assured knowing that no matter who or which office is involved, the process will be the same every time.
A major advantage is that you will maintain records and be able to readily create an audit trail, hassle-free.
With a growing business, the month-end close process becomes more and more complicated. Automation enables scalability and supports time savings, no matter how complex the process may become.
The accounting month end close process is inevitable for any sized business. While it can become time-consuming and stressful, you can prevent this from being the case by implementing automation solutions like SolveXia.
Automation streamlines the workflow, saves time, reduces errors, and allows your accounting team to spend their time on tasks that require human attention and thought.
Ready to see a tool like SolveXia in action? Feel free to schedule a demo!
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