Month End Close Process Flowchart: Complete Guide

Data Analysis

Business decisions cannot be made without accurate financial statements. And, accurate financial statements cannot be procured without a timely and repeatable month end close process. A month end close process flowchart can help to keep your month end close process running smoothly.

When it's complemented by financial automation tools, your organisation and finance team has the power to unlock immense time savings, error reduction, and workflow optimisation.

Let’s take a look at how this can be your reality.

Coming Up

1. What is the Month End Close Process?

2. What are Month End Close Procedures?

3. Why Use a Month End Close Process Flowchart?

4. What to Include in a Month End Close Process Flowchart?

5. What are Month End Process Flowchart Best Practices?

6. How Long Does the Month End Close Take?

7. What are the 6 Steps in the Month-End Closing Process?

8. How Does Automation Improve the Month End Close Process?

9. What is the Month End Close Checklist?

10. What are Month End Process Best Practices?

11. What are Month End Pitfalls and Challenges?

12. The Bottom Line

What is the Month End Close Process?

The month end close process entails a set of activities that ensure a business’ financial records (books) are accurate and sealed. The month end close process enables:

  • Simplified tax filing
  • Streamlined auditing
  • The ability to make informed and timely business decisions
  • An accounting system that is accurate, consistent, and efficient
  • Visibility, transparency, and trust with regard to the business’ financial health

What are Month End Close Procedures?

Month end close procedures look pretty similar for organisations of all sizes, and that’s because the process comes down to achieving the same goal. In general, the procedure will consist of:

  • Collecting information, including: performing an inventory count, income statement accounts, general ledger, and accrued expenses
  • Account reconciliation: Cross-checking account statements with third-party data to ensure that all accounts are balanced and displaying properly. These accounts span: cash, savings, checking, balance sheet accounts, and prepaid accounts.

Given that transactions exist across various systems and modules, it helps to have an automation tool like SolveXia that can pull together disparate data into a centralised system.

This way, you can cut the time it takes to perform account reconciliations down dramatically because the process becomes automated. Removing the manual process of account reconciliation will result in reduced human error, time savings, and, in turn, cost savings.

Why Use a Month End Close Process Flowchart?

As you already know, the month end close process can become tiring, complex, and stressful.

A month end close process flowchart can help to clarify the process and keep everything in order. The month end process flowchart is a visual representation of each step of the process, outlined in sequential order.

The reason why month end process flowcharts end up being so helpful is because they provide a way to:

  • Plan the process’ implementation
  • Document the process
  • Review the process for inefficiencies or opportunities for improvement
  • Understand how the process is performed
  • Share or train others on the process

What to Include in a Month End Close Process Flowchart?

After hearing a month end process flowchart provides for your organisation, you’re likely wanting to create your own. And, why not? There’s only upside to be gained.

So, let’s consider what you’d need to include:

1. Roles:

Every task in the month end close process should have a responsible party or team. When you select an automation software like SolveXia, you can remove key person dependencies and help to clearly define roles.

2. Time Frames:

Define your ideal time frame for each task and set deadlines for the account close process. This way, every person with a defined role in the process is aware of what needs to be done and by when.

3. Systems:

There will likely be various tools and systems involved, especially because of the sheer amount of data required for the account close process. Make note of what systems are involved.

Alternatively, you can worry less about this step when you implement an automation tool to handle your account reconciliation for you. With a tool like SolveXia, you can design the process once (using drag-and-drop functionality to set it up) and integrate SolveXia with your legacy systems to automatically pull whatever information is needed.

What are Month End Process Flowchart Best Practices?

There are a lot of pieces involved within designing the optimal month end close process flowchart. To do it well, take a look at these recommended best practices:

  • Document steps clearly: The flowchart can be used for existing and new team members to carry out the steps according to standard operating procedures (SOPs). This all begins with documenting every step and making sure it’s easy to understand.
  • Take advantage of automation: Financial automation tools deliver efficiency, visibility, accuracy, and time-savings to your organisation. The financial close process is a perfect use case for software solutions like what SolveXia offers.
  • Communicate clearly: Be sure to check-in with any responsible party during the financial close process to ensure that everything is running smoothly. Once the process is done, it may be useful to conduct a post-mortem meeting to open the floor for feedback.
  • Be open to change and improvement: The only constant in business is change. Be open to regularly reviewing your month end close process and month end close process flowchart to improve upon it.  

How Long Does the Month End Close Take?

According to data from the American Productivity & Quality Center, the median account close process for 2,300 surveyed organisations was 6.4 days, back in 2018. In a survey from 2019 out of Ventana Research, 46% of organisations were closing in four days.

The time it takes to perform the account close process varies by organisation. For some, it could take weeks to manually locate all necessary data and spend time transforming it within spreadsheets across computers. But, that’s the old way of doing things.

As you can see, with the progression of time and evolution of technology, the account close process can be shortened. With automation solutions, you don’t have to sacrifice accuracy for speed because you gain both when using financial automation software.

What are the 6 Steps in the Month-End Closing Process?

Here’s a look at the steps involved in the month-end close process.

1. Confirm Transactions for the Period

Begin by checking every transaction for the period against external statements. An automation tool can do this for you and flag you if there’s anything mismatching.

Without an automation tool that will pull your data together, you’ll have to do this manually by importing payroll, verifying all account payable bills and account receivable invoices are in the system, and that all expense reports have been approved. Don’t forget about credit and debit charges, too.

2. Post Closing Entries in GL

Once you account for all the transactions that took place in the accounting period, you can close the accounts and post their closing entries to the general ledger. This is a crucial step to create financial statements. This includes: posting accruals, reversals, and deferrals; posting revenue recognition from schedules, along with depreciation and amortization.

3. Check Sub-Ledgers

Sub-ledgers break down the details that won’t be found in the general ledger. Be sure that anything in a draft form is taken care of and be aware of any recurring transactions that haven’t gone through.

4. Perform all Reconciliations

If transactions are not matching, then you have to perform account reconciliations to figure out the reason and make amendments. With an automation tool like SolveXia, you can run account reconciliations more frequently, which can help to spot potential fraud earlier and nip it before the situation worsens.

5. Review

Before you begin preparing financial statements, review everything to investigate anything unusual and check how your actuals compare to your forecast or budget.

6. Prepare for Next Closing

Now that your main steps are done, you can get ready to repeat the process again next month. With your month end close process flowchart handy, along with the aid of automation software, the account close process can be seamless.

How Does Automation Improve the Month End Close Process?

Automation can massively reduce the stress and time-consuming nature of the account close process for your team. With automation implemented, your organisation benefits from:

1. Reduced Error

No matter how capable or experienced your accounting team is, when it comes to performing manual data entry across multiple touchpoints, there’s the risk of manual error. With automation solutions, you remove this risk and can rely on accurate data.

2. Increased Visibility

In most instances, there’s more than one person involved in the account close process. In fact, the tasks may be spread across regions, and with the rise of remote working, you’ll need to communicate more than ever so that everyone is looped in. Automation solutions simplify this by offering visibility into the process at every step.

3. Easier Auditing

Whether you need to conduct an internal or external audit on your financial statements, the use of an automation tool will make this easier than ever. Every action is recorded and stored in the system.

Plus, a tool like SolveXia allows for team members to make notes of any transaction that has been amended so that everyone is aware of the reasoning. Audit reports can be pulled at any point in time.

What is the Month End Close Checklist?

Due to the amount of moving parts and data required to perform the month end close process, it’s helpful to have a checklist for reference. This way, you can make sure that you didn’t miss anything.

Remember to review these accounts:

  • Cash
  • Inventory
  • Fixed assets
  • Accounts payable
  • Accounts receivable
  • Notes payable (with bank)
  • Intercompany accounts
  • Accrued taxes
  • Expenses
  • Accrued vacation
  • Accrued payroll

What are Month End Process Best Practices?

When carrying out your month end close process, keep in mind these best practices:

  • Achieve speed and accuracy: You shouldn’t have speed without accuracy. It is of utmost importance that your closed books are accurate because they are used to make big decisions. The simple fix to achieve both at the same time: automate.
  • Strive for improvement: Mistakes are inevitable. But, once you make them, make changes to prevent them from happening again.  
  • Communicate across departments: Although the account close process falls into the hands of your finance team, all departments should be aware of what the process entails and why it’s so important. It may affect how they go about their business and document transactions.

What are Month End Pitfalls and Challenges?

Perhaps the greatest challenge when it comes to the month end close process is the inefficiency that can rear its head. In most cases, organisations will report that the inefficiency stems from the starting point, namely - the collection of data from multiple systems.

Having to manually locate, combine, and adjust data results in wasted time that could otherwise be spent performing high-value and analytical tasks.

If you’ve followed us up until now, you know that the best solution is to use financial automation software that can pull all data into a centralised location, cleanse it, and adjust it as needed to perform reconciliations (and create reports) in what feels like no time.

The Bottom Line

While having a month end close process flowchart is a useful addition to your month end close process, the ultimate way to optimise your process and close your books on time accurately is to leverage financial automation software.

Tools like SolveXia exist to save time, reduce errors, and make your financial processes run smoothly and easily. See how automation tools like SolveXia can work for you.

Free Up Time and Reduce Errors

Request Demo

Intelligent Reconciliation Solution

Learn More

Intelligent Rebate Management Solution

Download Data Sheet