Say goodbye to disorganized books and hello to a month-end closing procedure. With the state of today’s economy, it is important that businesses can trust their financials. Having instant insight into their financial standing means companies can make quick, informed decisions to switch how or what they are doing to keep their doors open.
- Automation is the key to reducing the time and effort required for the month-end closing process.
- In a survey from 2019 out of Ventana Research, 46% of organisations were closing in four days.
- Software easily records closing activities, who performed them, and what time, resulting in a convenient audit trail.
- By doing so, the year-end closing process becomes easier as you already have all your documents and records neatly in place.
- The petty cash fund accounts for tiny purchases that are so easy to overlook.
- Develop workflows that allow for automatic processing and recording of petty cash transactions.
It also provides a virtual benchmark for your physical inventory counts that can reveal areas in need of improvement or “blind spots” that create needless ongoing expense. If your system supports barcoding, RFIDs, or other information management protocols, physical inventory counts will be even faster, since all items will be tracked in the system in real time. If your company uses a petty cash fund, that spend will likely become invisible unless you have systems in place to track it. Manual accounting involves tracking receipts and cross-checking them with withdrawals from petty cash. Centralized data management and close integration between your procurement and accounting systems will streamline reconciliation and keep both revenue and expenses from slipping through the cracks.
E. Test and Refine the Automated Process
So an accrual entry of $200,000 is added to record earned revenue, offset by a corresponding entry to the Accounts Receivable account. When the customer pays their bill next month, the cash entry of $200,000 generates a corresponding drop in Accounts Receivable. Reconciling accounts payable and accounts receivable in this way is also known as the accruals process, as dictated by accrual-based accounting principles. As with Step 1, this part of the month-end close is much more transparent, accurate, and swift if you’ve been recording and tracking spend automatically in your accounting system. You’ll have much less risk of maverick spend or fraud throwing a spanner in the works, too.
Each item on the list is often done through a separate spreadsheet by isolated individuals specific to their departments. When done the traditional way, these tasks are invisible to the wider finance function, and it can be difficult to integrate the work with the monthly closing process as a whole. Hopefully, this article has given you a better understanding of the month-end close process.
- Data visibility also negatively impacts bank reconciliation, bookkeeping, cash flow management, and financial forecasting.
- If finance and accounting miss out on conversations with department leaders over these updates, they end up with holes in the numbers.
- This will give you a better understanding of how intuitive and efficient the tool is for your team.
If there’s no centralised data solution to combine all your systems or spreadsheets, this step can be unnecessarily time-consuming. From reviewing financial statements to reconciling inventory levels, a month-end close checklist helps you keep track of everything you must accomplish. And best of all, it can help prevent those dreaded last-minute scrambling sessions that often lead to mistakes. Now that you’ve got the general month-end process down, you can start divvying up the tasks among your team members.
But as you grow your business, automation can save you time and costly errors. That way, you can automate processes, such as bank reconciliations and financial statements, and avoid days of manual work. Finance and accounting need to find any and all opportunities to automate tasks in the monthly closing process. This is what frees their time to not only close faster, but contribute to larger conversations around strategic business goals. These are some common ways to use SaaS accounting software, financial close software, and other tools to automate aspects of your month-end close process. Now that you have all the information in place and have verified them, it’s time to prepare your financial statements.
Own the of your business
The exact steps in the month-end close process may vary from company to company, depending on the type of accounts and transactions that make up its financial data. The month end close process involves recording, reconciling, and reviewing all business transactions and finalizing the account data for the month. This month-end close process flowchart should give you a high-level idea of what a high-growth B2B SaaS company like Gem has to cover each period. But keep in mind that each general task will have many individual steps under it. And the timeline will depend on the specific context of your business. While there’s a certain level of predictability in expenses and transactional activity, each month may come with new wrinkles to account for.
What are the biggest challenges of the month-end close?
The month end closing process is a procedure that accounts for all of the previous month’s financial transactions. Your accounting team reviews, records, and reconciles all relevant account information. Automation is the key to reducing the time and effort required for the month-end closing process.
Prepare for Next Closing
To foster adoption and enthusiasm for the new technology, consider assigning “champions” within each department or team who can serve as advocates for its use. These individuals can help answer questions from their colleagues and share best practices for maximizing productivity. Once you have narrowed down your choices, request demos or trial periods from vendors to get hands-on experience with their platforms. This will give you a better understanding of how intuitive and efficient the tool is for your team. Additionally, seek feedback from other finance professionals who have implemented similar solutions. Their insights can provide valuable guidance and help you avoid potential pitfalls.
Selecting the right automation tool is a crucial step in streamlining your month-end close process. With so many options available, it’s important to carefully evaluate each tool to ensure it meets your specific needs. Moreover, automating the month-end close process promotes collaboration among cross-functional teams. By centralizing all relevant data in one system accessible by multiple users simultaneously ensures everyone is working with accurate information in a collaborative environment. It can show you your business’s financial information and what areas you need to improve in. Closing your books monthly can also help you make decisions about your business’s finances, prevent costly mistakes, and prepare you for tax time.
In many cases, those estimates are not materially different from the actuals. However, when it’s time to close the fiscal year, the actuals will need to be determined. That means that the year-end xero vs quickbooks online review close will likely take at least an extra day or two. But if you don’t see your business having an accounting department soon, you can outsource your finance work to professionals.
Having a system where only authorized employees are allowed to access the documents is essential. Next, perform a variance analysis by region or department (or whatever divisions make sense). This will help show which areas of your business did better than expected and which ones didn’t do. Take note of any pain points or challenges encountered during testing and brainstorm solutions on how to address them effectively. This might involve tweaking certain parameters, adjusting workflows, or fine-tuning integration with other systems. During this testing phase, it is important to involve key stakeholders and end-users who will be using the automated process regularly.
But the shorter you can make your timeline, regardless of business size, the better. The workflow should cover the entire process, from ensuring customer payments before the closing date to flux analysis and delivery. The calendar serves as a timeline for confirmations and setting budget expectations, which can be accounted for as you approach your month-end close or forecast future closes. That means that by the time they finish last month’s reporting, it’s nearly time to start the whole cycle again for the next accounting period. Teams need to get out of this vicious cycle by mapping out a more streamlined timeline. Examine your checking and savings accounts, loan and credit accounts, and digital accounts, such as PayPal.
Automate what you can and make sure that all team members have an accurate list of their responsibilities – this will help curb any confusion or missed deadlines. The month-end close process in NetSuite is similar to the process in other accounting systems, such as SAP Business One or QuickBooks. However, there may be some specific differences in the way that the process is carried out, depending on the features and capabilities of the particular system. That being said, having an understanding of the process and an organized checklist of tasks that need to be completed is key to ensuring accuracy and efficiency. To save time and energy in every month-end closing process, schedule a demo of Order.co. Large-scale and repetitive tasks like month-end closing are crucial to implementing best practices.
When you select an automation software like SolveXia, you can remove key person dependencies and help to clearly define roles. A closing goal is critical for the process to flow smoothly and finish on schedule. Take time to plan the sequence of closing tasks (or use our handy checklist below). Then assign responsibilities and determine deadlines for each step to help the team effectively manage the process. Developing this structure before you start makes it harder for tasks to fall through the cracks.
Once the research and documentation have been reviewed, the team is ready to craft monthly financial statements. Every financial statement should be constructed carefully and with an eye for accuracy. Vital information such as cost of goods sold, net income, and depreciation must all be included for the financial statements to properly reflect business operations. Furthermore, any adjustments made during the course of the month should also be applied accordingly. A consistent, repeatable month-end close process is key to successfully closing the books each month. Establish a standard procedure to ensure accuracy in financial reporting and reduce errors caused by inconsistent accounting standards or manual calculations.