At the end of each month, accountants go through all transaction records from that period and make sure each has been properly entered into the proper accounts. If you’ve not found a way to move your accounting process online, it’s time to get flexible. But even if you’re accessing digital accounting software or online programs, it’s important to back up all of your documents.
Furthermore, check your prepaid accounts against your expense accounts to prevent duplicate payments. It’s easy to let transactions made from the petty cash fund go unrecorded. Automation software gives these teams awareness of financial activity throughout the firm, giving them a chance to provide input for purchasing decisions advantages and disadvantages of historical cost accounting early on. The problem here is that financial data comes from several disparate sources, and, once extracted, accountants must clean it up and turn it into a consistent format. Having to create multiple spreadsheets to cover labor-intensive data cleansing slows down the process and increases administrative expenses.
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One of the most glaring issues well-known to business administrators is the inefficiency of gathering all the information needed. On top of a laid out plan and a checklist, let’s go over some best practices to make this essential business process as smooth as it can be. If you do not have another person you can ask to review your information, double and triple check your own work to ensure the information is accurate.
It’s important to consolidate every category of transaction in one place. Spend management software with multiple user accounts lets your accountancy team verify all transactions company-wide. Templates and checklists for every step in the process might sound incredibly taxing, but they can shave entire days off your month-end close process. There’s no perfect month-end close checklist, since all companies are different. Some work with products, meaning they’ll have the extra steps of tracking inventory.
Prepare for Next Closing
Creating a documented system is vital to streamlining the month-end close process. Documenting the process helps teams create uniformity, identify errors, and operate with an effective workflow for monthly, repeatable success. Establishing a series of steps and assigning roles for different closing tasks sets expectations and provides clarity throughout the process. It also allows team members to pick up tasks quickly if someone is unavailable or out of the office.
- Templates and checklists for every step in the process might sound incredibly taxing, but they can shave entire days off your month-end close process.
- Ask someone who didn’t prepare the accounts to review them so they’ll find errors or problems you didn’t notice.
- An automation tool can do this for you and flag you if there’s anything mismatching.
Finally, implement processes to ensure your accounting and finance teams have what they need. HighRadius’ Autonomous Accounting can help your business make the month-end closing process faster, smoother, and error-free. Its AI-powered transaction detection system gives access to real-time data and helps spot errors.
Ensure that the accounts payable balance, for instance, falls in line with the general ledger. To that end, organize the receipts and write down all your purchases. Cross-check your records during this step to make sure everything has been paid. Accounting systems aren’t homogenous entities; they usually come in modules covering specific purposes such as an accounts payable and an accounts receivable department. Part of the closing process is reconciling all these components together. For example, if the process for submitting expense reports is not clearly defined, it can result in a variety of different formats that create additional work for the finance team.
Maximize working capital with the only unified platform for collecting cash, providing credit, and understanding cash flow. Transform your accounts receivable processes with intelligent AR automation that delivers value across your business. Wherever your team is in that spectrum, a comprehensive checklist that includes all the processes and assignments is a must in order to streamline the closing process. Ideally, your checklist should make it easy to swap tasks between team members to keep the process moving efficiently. For many accounting teams, controllers, and CFOs, the month-end close involves long hours and added stress.
On one end of the spectrum are the accountants, controllers, and CFOs who keep it all in their heads and use a lot of manual processes. That can work for a while, but as the accounting department grows, that process can become total chaos. Tribal knowledge abounds, and tasks can be easily overlooked, especially if a key person is out for a few days. 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.
Month-end closing – what does it involve?
These include the balance sheet, income statement, and cash flow statement. Make sure the entries are recorded correctly and that there are no discrepancies between the financial statements. Journal entries of recurring monthly transactions must be performed at the time of the month end close. This applies to such transactions as accrued expenses, amortization, depreciation, and loan interest.
Business is Our Business
The size and gravity of the task present many challenges for finance teams. Without centralized access to comprehensive financial data, teams often miss deadlines, work with incomplete data, or make inaccurate assumptions about their financial position. Keeping track of revenue from product sales and services ensures that your business is on track with your forecasted ARR and sets you up for compliant tax filings later.
Occurrences like this could double the entire month-end process and will surely have a knock-on effect to other accounting processes. Back up your data using a reliable cloud-based system that can be stored securely. The key benefit to using templates within your financial close is that they standardize operations. Creating a standard operating procedure is proven to improve the speed and accuracy of your month-end process. As discussed, making your accounting at the end of the month more efficient will not only give an accurate insight into the financial state of your company, but also prevent future mistakes. Streamlining the process better prepares you in case of an audit, and for when tax season eventually rolls around (far too soon, might I add!).
Month-End Closing Process in Accounting
The month-end closing process helps ensure that all revenue and expenses are properly accounted for and that financial statements are accurate. Also, if there is an error in the data, using the manual process will take a lot of time and effort to find the cause and fix it. This necessary time delays the release of monthly financial statements as your accounting team must spend time reviewing completed work.
AR best practices to read and share
The month end process flowchart is a visual representation of each step of the process, outlined in sequential order. Accurate financial statements are also needed to prepare a budget for your business, and accuracy in financial reporting is an absolute must for tax compliance. The most important reason is that without properly closing the month, your financial statements will not be accurate and can negatively impact the company. It is challenging to manage a business without readily available financial statements.
Adopting Autonomous Accounting Solutions like HighRadius’ can help you make day-zero financial close a reality through immediate and accurate decisions. If multiple teams are involved in the monthly closing process, then keeping track of the status of tasks is going to be a significant pain point. HighRadius’ Autonomous Accounting Solution gives real-time visibility into the different financial tasks and ensures activities that involve multiple stakeholders don’t get slowed down. However, here’s an ideal flowchart that can be followed for a month-end close process depending on the roles, deadlines, and processes. The financial close doesn’t have to be a headache for the accounting team. Following the right set of steps when dealing with financial records at the end of each month will result in a positive impact on the organization as a whole.
