In addition to your company’s audit readiness at the end of the month, a checklist also helps you prepare your annual financial statements. Implementing a month-end closing checklist increases efficiency and accuracy, reducing the time, effort and expense involved in preparing for year-end audits. Understanding why month-end close processes are vital to business is the first step in preparing a checklist. Before we discuss the common errors people make with their month-end closing process, let’s review the benefits of having a month-end close checklist for closing out the month. Additionally, for publicly-traded companies, financial statements and regulatory reporting have to remain in compliance with laws and regulations.
The month being closed remains open for six additional business days in the new month in order to process all prior month transactions. Additionally, many iJournals and core journals can only be generated after the last calendar day of the month. By integrating these best practices into your month-end close routine, you pave the way for a streamlined, error-reduced process that yields accurate and insightful financial reporting. The month-end close process in NetSuite is similar to the process in other accounting systems, such as SAP Business One or QuickBooks.
BlackLine delivers comprehensive solutions that unify accounting and finance operations across your Oracle landscape. BlackLine’s foundation for modern accounting creates a streamlined and automated close. We’re dedicated to delivering the most value in the shortest amount of time, equipping you to not only control close chaos, but also foster F&A excellence.
Therefore, accurately closing your accounts at the end of each month is critical for producing reliable financial statements. Month-end close allows a company to properly record and account for all transactions that have occurred during the month and to precisely reflect the financial situation and performance. Performing a month-end close helps build confidence in the company’s financial data which is used to prepare its financial statements. The process ensures that the data in those statements is reliable and accurate.
The Steps of the Month End Close Process
Understanding deadlines and schedules is critical so you can work toward an ideal close date. In addition, accountants must begin to cultivate strong written communication skills with the ability to think critically. They will also need strong oral communication skill and the ability to convey pertinent financial information to executive teams and stakeholders. Whether you’re new to F&A or an experienced professional, sometimes you need a refresher on common finance and accounting terms and their definitions.
- This lets them track that the business is trending in the expected manner.
- They can analyze your numbers and give you insights to make good business decisions.
- Automatically create, populate, and post journals to your ERP based on your rules.
- The year-end close process is the same as the month-end process, except you’re accounting for a full year instead of the previous month.
- Thus, there is a discrepancy between the valuation of the invoice at the time of posting and the exchange rate end of the month.
- Review how long it takes you to currently complete the month-end closing activities, and work backwards with a few days as a buffer in place in case of hurdles or issues that may arise.
After all, day-to-day responsibilities don’t get put on pause during the close — you’re expected to handle both. 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. 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.
Close the books 4x faster, collect over 95% of receipts on time, and get 100% visibility over company spending. Most importantly, BlackLine enables modern accounting to be achievable. If you have month-end close challenges, you may want to implement some of these month-end close best practices.
What should your month-end reports contain?
Poor organization and coordination cause month-end close drag out — potentially for weeks. Protracted close procedures trap teams in a perpetual cycle of struggling to close the books in one month while falling behind in preparing for the upcoming close. Once you close your books, you can’t go back and create journal entries for that month. So make sure your financials are accurate before closing the accounting period.
Draft financial statements
Use your inventory count to make adjustments and reconcile your books when you complete your end-of-the-month procedures. To compare your petty cash fund to your records, physically count the leftover cash in your fund. Or, you might have forgotten to record the used petty cash in your books. Start with one of the above categories and work your way to the others. Divvying up the records when reconciling your bank statement can help you stay organized and catch errors at month-end.
Prepare For the Next Closing
There’s really no way around the process, so it’s best to streamline it and utilise financial automation software to make it easier on your team. This requires that a person (or system) handles pulling together all relevant financial information, with items like the income statement, expense records, a list of transactions, and the like. If there’s no centralised data solution to combine all your systems or spreadsheets, this step can be utilities expense unnecessarily time-consuming. Month-end close is the process of finalizing the books and recording all financial activity at the conclusion of every month. It’s a check-and-balance process where reported cash levels, transactions, and budgets are scrutinized to ensure accuracy. If you want to learn more about how Mosaic helps finance and accounting teams assume a more strategic role in the business, reach out for a personalized demo.
“I have a 10-day rule,” said Somya Munjal, CPA, founder and CEO at Youthful Savings and managing partner and founder of CPA for the People LLP. “Ten days after month end is a good rule before presenting close information. Small improvements made one at a time won’t rush the process but still can have a significant overall impact. If something looks abnormal and needs tweaking, it may grow over the years.
Finding the Solution with Automation Tools
Plus, accurate monthly reporting makes year-end closing much easier to understand. Here, we will cover what you need to know about month-end closing accounting and see how a solution like SolveXia can alleviate the load for your team. Check if you’ve recorded all your incoming cash during the month and capture any missing items. Efficient month-end closes are the foundation for strong board reporting and insightful flux analysis. Inaccuracies and delays in the close will derail each of these processes, hurting your standing with investors as you struggle to explain the “why” behind your numbers.
Modern solutions like Spendesk can take additional processes off the finance department’s hands, such as searching for receipts and invoices and reconciling payments and receipts. This allows you to complete the month-end closing up to four times faster each month and focus on more important, strategic tasks from then on. This process also involves preparing balance sheets or income statements and making any necessary adjustment entries. Month-end closes usually occur right before month-end reports are due, so accuracy is important to ensure proper bookkeeping. All departments whose activities impact financial records should follow similar procedures and maintain similar schedules to support the month-end close. Following a sound basis of accounting such as Generally Accepted Accounting Principles (GAAP) will maintain consistency across the organization and support the month-end close process.
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. 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.
Now that you’ve got some knowledge under your belt about the month end close process, the next step is to create a checklist to streamline your closing procedures. The year-end close process is the same as the month-end process, except you’re accounting for a full year instead of the previous month. Also, in the year-end close process, income and expense accounts are “reset” in preparation for a new year-to-date account.
This is a fiscal reporting requirement for some companies, and helps businesses keep accurate records throughout the year. BlackLine and our ecosystem of software and cloud partners work together to transform our joint customers’ finance and accounting processes. Together, we provide innovative solutions that help F&A teams achieve shorter close cycles and better controls, enabling them to drive better decision-making across the company. BlackLine is a high-growth, SaaS business that is transforming and modernizing the way finance and accounting departments operate. Our cloud software automates critical finance and accounting processes. We empower companies of all sizes across all industries to improve the integrity of their financial reporting, achieve efficiencies and enhance real-time visibility into their operations.
