The month end close process takes most organisations several days to weeks to iron on. By following month end close best practices and leveraging financial automation solutions, you can cut down the time to take just hours or even minutes.
We’re going to take you through the month-end closing checklist and month-end close timeline. Then, we’ll share month-end close best practices and look at tools that can help you streamline the process.
1. What is the Month End Close Process?
2. Why is Month End Close Important?
3. What are the Main Steps in Month End Close?
4. How Long Does the Month End Close Take?
5. What are the Challenges of Month End Close?
6. What are Best Practices to Improve Month End Close?
7. What is a Month End Close Checklist?
8. How Automation Helps with Month End Close?
The month end close process is an accounting procedure that follows multiple steps to ensure accurate records before closing the books for that period.
From review to reconciliation to reporting, the month end close process consists of reviewing the company’s balance sheet, journal entries, and additional documentation like bank statements.
As a result, the month end close process provides a company with:
The month end close process is vital. In fact, for publicly-traded companies, it’s regulated.
For any organisation, the month end close process helps to:
While every company uses their own systems, tools, and people to perform the month end close process, the process follows these steps:
The first and sometimes most time-consuming step of the process involves collecting all necessary information. You’ll have to pull various data to reconcile accounts, such as:
To cross-check records, you’ll have to combine various accounting systems and entities to make sure records match.
Once you have data in a centralised and unified format, you can begin cross-referencing transactions. Accounts that are in need of reconciliation span: prepaid accounts, cash, savings, checking accounts, balance sheet accounts, and petty cash.
Last but not least, be sure to review fixed assets and their depreciation schedules. Perform an inventory count to deduce whether you need to replenish before the next period.
With every account up-to-date and reconciled, you can compile the records as part of your financial statements.
In 2022, Ventana Research found that it takes most companies an average of 6 days to complete the month end close process. That’s more than an entire working week spent on one main business process.
Automation solutions can cut that time into a fraction. With an automation solution like SolveXia, it will automatically pull data from various sources, cross-check transactions, and produce reports on an as needed basis.
As SolveXia manages these repetitive and detail-heavy tasks, your accounting team can spend their time on high-level and value-add tasks instead.
You’d think that because the process is repeated every month that it’d become easy and straightforward. As a matter of fact, the manual month end close process is rife with challenges because of all the requirements.
Some common challenges include:
One of the biggest hurdles for the month-end close process is disparate data sources. It not only takes time to track down necessary information, but it may also require reformatting to be reconciled.
Alternatively, businesses can leverage automation solutions like SolveXia that connect data sources from existing accounting systems and legacy systems.
This is particularly crucial when you have a high volume of monthly transactions and/or are using multiple payment providers like Amazon, eBay, PayPal, and the like. Automation solutions are capable of pulling data from disparate payment provider sources to be able to reconcile them in minutes.
With the high influx of data and transactions, it’s only fair to expect some human errors as part of the process. However, small errors can spell major disaster. Automation software eliminates human error and saves time.
The many moving parts of the process require that everyone is aware of their responsibilities and can follow a standard approach.
That’s easier said than done when people have their own way of working and are often performing their respective steps of the process in different locations. (Hint: Automation standardised the entire process!)
We promised month end close best practices, and now we’ve arrived at the moment you’ve been waiting for.
Here’s how you can improve your month end reconciliation and close process to reduce inefficiencies and prevent errors:
While you may be tempted to hasten the process, don’t forget that accuracy is the most important element for your month end close steps. With incomplete or incorrect information, you stand to run into risks and poor decision-making.
Accurate financial reports are the holy grail for businesses to thrive. To ensure accuracy, speed, and quality, leverage a financial automation tool to do the tedious work for your team.
The financial close is inevitable, so the good news is that you can prepare for it in advance. Review your current financial close process to determine how long it’s taking on average.
Then, set a goal for your team and clearly communicate what you want to see happen moving forward. This way, everyone is aligned on what’s expected from them.
One of the best ways to make sure that everyone is in alignment and knows what they need to do is to standardise the process. Clearly document the steps, what people need to know before getting started, and how they should handle common issues that may arise.
Standardisation makes collaboration better and helps to promote a workplace culture that is ready to handle any situation without stress.
Before closing the books, set a meeting with your finance team to discuss the challenges, pain points, and resolutions.
By holding this meeting, you’ll get to hear a range of perspectives and prioritise what needs to be adjusted first. Then, you can apply the month end close best practices next month to improve.
We’ve drilled this point throughout the entire article because it is quite possibly the best single step you can take to completely transform how your month-end close process happens.
Automation solutions like SolveXia can eliminate common month-end close challenges right away. Financial close automation tools offer the ability to collect and format data, reconcile with ease, provide process transparency, promote collaboration, standardise the process, and finalise everything with automatic month end reporting and audit trails.
To make sure that nothing gets forgotten, keep in mind this month end close checklist. This is especially important if you are completing the process manually.
(Another benefit of using an automation solution is that you get to design the process and then let it run itself, which ensures that nothing will be overlooked.)
Out of all the month end close best practices we’ve shared, the pinnacle of success sits within the use of automation software. Automation software brings so many benefits to your business, especially when you utilise it for the month-end close process.
You stand to gain:
For more on how SolveXia can help maintain an accurate, expedited, and seamless month end financial close process, request a demo!
With these month end close best practices in mind, it’s now time for you to put them into action. Say goodbye to the days of tedious, time-consuming, and harrowing month end close processes and welcome automation to resolve your challenges. With automation comes accuracy, time savings, and cost savings, so it’s a win-win for everyone.
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