As the calendar nears the end of the month, the month end accounting process takes over. But, rather than having to rush and stress to get everything done in time, you could cross every item off your month-end closing checklist in minutes using automation software to help.
To expedite your month-end close timelines and achieve month-end close best practices, keep on reading because we’ll share everything you need to know.
1. What is the Month End Close?
2. What are the Steps for Month End Accounting?
4. What are Best Practices to Improve Month End Accounting?
6. How Long is the Month End Close?
7. What are the Challenges of Month End Close?
8. How Does Automation Help Month End Accounting?
The month end accounting process to close the books is a recurring set of steps that businesses must take to make sure that it has properly recorded and reconciled its transactions for the period.
The month end close process serves as a catalyst to streamline following accounting procedures, such as the year-end close.
The month-end closing process helps organisations to:
Traditionally, the month-end close process has been tedious, monotonous, and overbearing for most finance departments. This is because it consists of several steps that rely on utmost attention to detail and require the time to collect documentation.
Nowadays, financial automation technology like SolveXia has helped to overcome these requirements. SolveXia’s automation software connects data sources and pulls required documentation automatically.
It performs transaction matching for account reconciliation, and streamlines the month-end close process, all the while removing the need for manual processing. This not only reduces time, but increases accuracy as well.
No matter what type of business you operate, the month-end accounting process will cover the same standard steps. While the software used and time it takes will vary, the month-end close process should cover:
Begin with recording all income received during the month, be it from invoices, loans, revenue, cash, etc.
During this step, it’s important to verify that the correct amounts have been paid and unpaid invoices are being taken care of. This is when the accounting team will add a journal entry to record each transaction.
On the other hand of accounts receivable, you’ll have to validate your accounts payables. This is the money that has been spent on bills, products, goods, and services. You’ll track this by reviewing company cards, invoice payments, and expense reports.
Now it’s time to perform account reconciliation. This often time-consuming process cross-references internal documentation to external statements to make sure everything is in alignment. Automation software can cut this process from days and weeks to minutes. Read more on the 5 best reconciliation tools here.
If your company uses petty cash, be sure to review the account. Record all receipts in which petty cash was used as the form of a payment.
Fixed assets are considered long-term items of value. Be sure to record payments related to fixed assets at this time.
Before closing the books, you’ll also need to count your inventory to record their levels and also deduce what you may need to replenish.
Consistency is key during this time. You’ll need to review financial statements such as your general ledger, business balance sheet, and profit and loss statement.
All of these statements offer the opportunity to maximise profits and minimise expenses, so they directly relate to the business decisions you will make.
After handling all accounts and steps, get organised for next month because you’ll be doing the process over again! Have your month-end close checklist ready as well as a timeline of when you wish to execute the process next month.
Keep in mind that with an automation solution like SolveXia by your side, you won’t need to plan so much in advance because the software can handle all steps quickly and accurately for you.
Essentially, the month end close requires the accounting team to zero out balances in the income statement accounts. This way, the accounts will start off at zero to begin the next period.
Since income statements are temporary, the income and expense balances will have to be transferred to retained earnings on the balance sheet.
As you can see, there are a lot of moving parts and transaction data needed to close the books.
Every business has to deal with the month-end accounting process, but most accounting teams tend to dread this recurring series of events.
With adequate preparation and the use of accounting software, it can be seamless and made easier for everyone.
Take a look at these best practices that can help to improve the month-end close process:
Take stock of how long it takes your organisation on average to close the books. Once you have the number of days (or weeks) in mind, set a realistic goal to how you can shave off some time during next month, next quarter, and next year. By following the following recommended steps, you can make the goal a reality.
While you will have your goal in mind, be sure that you never sacrifice quality for speed. Accuracy is of utmost concern when it comes to closing the books.
Bring your team together to discuss your intended goal, the processes, and everyone’s responsibilities. Solicit feedback to find out their pain points from the prior month so that everyone can be involved in finding solutions to overcome the challenges.
Automation is your best friend when it comes to most financial processes, especially month-end accounting.
For example, an automation tool like SolveXia will save you time, reduce errors, collect data from disparate sources, perform accounting reconciliation, and provide you with month end reporting and audit trails, as desired.
The month-end accounting process isn’t called the month-end accounting process for nothing. There are real benefits to performing the process on a monthly basis (and potentially even greater benefits for reconciling your accounts on a daily basis).
When you close books monthly, you’re able to:
The time it takes to complete the month-end accounting close process varies for every organisation. It is impacted by your team, its tools, the number of transactions, and more. Typically, organisations close their books over an average of about 6.4 days.
SolveXia can help your team close the books in hours instead of days.
The reason the month-end close process tends to take days or weeks is because it requires so many moving parts. From data collection to transaction matching to updating records, there is a lot to get done in a short amount of time. Plus, there’s a lot of weight tied to the accuracy of the work.
Some common challenges of the month end accounting process include:
For every bullet on the list above, automation software serves as the solution! Automation software is able to connect various data sources. A tool like SolveXia, can for example connect with your existing and legacy systems.
This makes it possible to pull data into a centralised location and the software will handle the formatting so that all data is usable, consistent, and ensured to be accurate.
Since every step requires different hands at work, the risk of someone missing a day or being out sick can lead to key person dependency.
Automation solutions will run with or without the person behind the screen, so you no longer have to worry about key person dependencies. Additionally, the software performs the manual labour in a fraction of the time and without the risk of manual errors.
Ready to see how a tool like SolveXia works in action? We invite you to book a demo!
Month end accounting is one of the most important aspects of running a successful business. How you close your books will determine your next step and can impact your reputation, business decisions, and tax filings. So, it’s no doubt that you’ll want to make sure you get it done right and in a timely manner.
With SolveXia, you can overcome the common pitfalls of the manual account close process, save time, and ensure accuracy every time with automation.
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