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. For example, ask where you can implement automation software to speed up your processes. Finally, implement processes to ensure your accounting and finance teams have what they need.
- You can tweak the calendar as time goes on to fit it around your schedule.
- Once you have implemented automation tools for your month-end close process, it’s time to put them to the test.
- For example, when you review your statements, you might notice that you’ve been spending a lot of money for a product that’s not selling.
- Finding a system that can automatically transfer data from one system to another is a great way to smooth out the month-end closing process.
Be sure that accruals and prepaid expenses are recorded accurately in your books. Furthermore, automating the month-end close process enhances transparency within an organization. With real-time visibility into financial data and progress throughout the closing cycle, stakeholders gain confidence in the accuracy and reliability of reports. Like many ERP packages, the NetSuite ERP has a formal closing process. Whatever accounting system you use, the following checklist covers most of the tasks that need to be completed before you can close the books. A month-end close template — like the one found here — can get you started on developing the best process for your organization.
However, you can cut that down to as little as 5 days if your accounting team has access to automation software. The month end close process allows you to track all the transactions your business conducts during the month. That’s crucial for ensuring your accounting data is as accurate and complete as possible. One of the main challenges in month-end closing is the amount of time it takes to complete the process.
The month end close process involves recording, reconciling, and reviewing all business transactions and finalizing the account data for the month. 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. 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. The petty cash fund accounts for tiny purchases that are so easy to overlook.
What are the key elements of the month-end close?
Alternatively, you can worry less about this step when you implement an automation tool to handle your account reconciliation for you. 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. 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. Like any accounting process, month-end closing is not without its challenges.
The team must manually upload data to the accounting system for the accounting department to process month-end goals. Unfortunately, this process is time consuming and error prone, so finding an automated solution is essential. 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. As a result, businesses that invest in good accounts receivable automation software can significantly improve their month-end closing process.
Automatically identify intercompany exceptions and underlying transactions causing out-of-balances with rules-based solutions to resolve discrepancies quickly. Make the most of your team’s time by automating accounts receivables tasks and using data to drive priority, action, and results. Each month, performing this process helps to lead up to the fiscal year’s end, in which regulatory reporting takes place. By doing so, the year-end closing process becomes easier as you already have all your documents and records neatly in place. It is challenging to manage a business without readily available financial statements.
- The month-end close process in NetSuite is similar to the process in other accounting systems, such as SAP Business One or QuickBooks.
- 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.
- To keep your accounting books as accurate as possible, you need to stay organized.
- Once everyone is satisfied that the statements are complete and accurate, they can be formally submitted.
This necessary time delays the release of monthly financial statements as your accounting team must spend time reviewing completed work. 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. So, a final review is always done before the closing process is completed. This review is done by the top management or someone who wasn’t involved in the closing process to get a fresh view of all the data once again.
Review your financial information
Now that you have all the information in place and have verified them, it’s time to prepare your financial statements. 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. The month end close is an accounting procedure that finalizes and closes out all financial activity for a business for the preceding month. The financial accounting role goes beyond just transactions, covering income cash, bank loans, savings accounts, monthly expenses, and other essential parts that impact the entire organization.
Depending on the size and complexity of an operation, it can take anywhere from several days to several weeks to complete. If you want to make your month-end process more efficient, we suggest that you check out our best practices for a stress-free month-end close. Financial statements include the income, balance sheet, and cash flow statements. These statements accurately reflect the company’s financial position and the results of financial operations for the month. 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.
Post Closing Entries in GL
On average, a larger company spends the first 10 days of the next month completing all the month-end process steps. Then they can create customized financial reporting bookkeeper for each department. Now it’s time to organize your monthly closing financial statements, such as the balance sheet, profit and loss, revenue and expense sheets.
Consolidate transactions
Plus, with every successful round your investors also want to keep tabs on the business. Financial statements are the product of your financial month end closing. It acts as your company report card, displaying an accurate picture for investors to grade. We perform month end closings for every client, regardless of their industry. A month end closing procedure clearly stamps your business performance in time.
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. Knowing about the major one-off expenses coming down the pipeline is crucial for marketing, finance, and accounting alignment. But trying to chase down updates in Slack messages, via email, or in person can slow you down.
Prepare a bank reconciliation to reconcile your bank account with your financial records. Bank reconciliations will also help you understand your cash situation and not overdraw your account. With account reconciliations, you’ll spot mistakes in your financial data and fraudulent transactions (if any!).
