Improve your month-end process with these tips and techniques

What are the steps involved in the accounting closing process?

The accounting close process is the procedure to securely close a month/period in the accounting cycle. All transactions, adjustments and calculations are finalized in this process. Generally, the steps involve in the close accounting process are:

• Record Jounral Entries: All transactions related to a period should be posted and updated in the general ledger.
• Fiscal Year Entries: Revenues, expenses, and other balance sheet run entries should be posted to the general ledger.
• Review account balances: All account balances should be regularly reviewed to ensure accuracy.
• Adjustment of entries: If necessary, adjustments such as prepayment, amortization, inventory and bad debts must be made.
• Financial reports: Financial reports like general ledger, balance sheet and income statement should be generated.
• Reconciliation: accounts should be reconciled and the balance should be updated.
• Closing Cycle: All books and records must be closed to complete the cycle.

In addition to the above processes, it is important to use appropriate internal controls and documents to safeguard accounting information. For example, independent reviews can be used to approve all transactions, journal entries, and calculations. Additionally, automated close-out solutions such as software solutions can be used to streamline the entire process thereby ensuring accuracy, timeliness, and data integrity.

Key points to remember

• Create a checklist or flowchart for the closing process.
• Automate manual processes to reduce errors and improve accuracy.
• Review accounts regularly to ensure accuracy.
• Create an effective system of internal controls.
• Seek commentary from financial professionals when needed.

What is the purpose of a month-end process?

Month-end closing is a necessary part of accounting because it prepares the company’s financial statements and books for the next period. It is also used to ensure compliance with external financial reporting regulations. The objective of a month-end closing process is to ensure that all income, expenses, assets and liabilities are accounted for and recorded accurately. It also allows in-depth analysis of financial data on an ongoing basis.

As such, the month-end closing process is critical to having an accurate and up-to-date financial picture of the organization. Through this process, companies can better assess their performance and take corrective action if necessary. The month-end close process also helps prevent fraud and error, and enables accounting staff to quickly verify and identify discrepancies.

Examples of month-end closing tasks include:

• Reconcile accounts to ensure accuracy and completeness of financial records.
• The review of account balances to ensure variance accounts and accrued accounts is properly stated.
• Prepare and analyze financial statements, such as balance sheets and income statements.
• Archive all relevant documents and physical and digital records.

To ensure a successful month close procedure, there are some tips you may want to consider:

• Develop a checklist and assign specific team members in advance.
• Stay organized and use a common repository for documents.
• Review accuracy of posting of general ledger entries and confirm balance of journal entries.
• Run trial balances frequently and do this at the end of the month to verify financial accuracy.
• Confirm accumulations and aging of accounts receivable, as well as accounts payable.
• Run final reports and review for accuracy before closing and locking the period.

What techniques can be used to improve the accuracy of the accounting close process?

Having a robust and accurate close up process is essential to ensure that financial statements are accurate and timely. The following techniques can be used to improve its accuracy:

• Create a checklist or flowchart. It should include a list of all the tasks that need to be done for the closing process. This will help ensure that each step is properly performed and documented.
• Schedule regular closings. Scheduling regular dates for closings can help streamline the closing process and ensure that it is consistently completed on time.
• Automate manual processes. Manual processes can be error-prone due to the need to not remember to complete each one. Automating manual processes can help reduce errors and improve accuracy.
• Review accounts regularly. It is important to review each account regularly to ensure accuracy. This includes reconciling accounts monthly and investigating any variance in the data.
• Create effective internal controls. It is important to have a system of internal controls to protect the accuracy of the close process. This may include the use of double-entry bookkeeping and require changes approved by multiple people.
• Look for reviews from financial professionals. Seeking advice from knowledgeable financial professionals can be invaluable in improving the accuracy of the narrow process. They may be able to provide information and recommendations to refine the process.

By implementing the techniques above, organizations can be confident that their accounting close process is accurate and completed in a timely manner.

What challenges have you encountered while managing the process close to accounting?

Managing the accounting close process is unfortunately not always a smooth ride. While the goal of an accurate, timely, and secure shutdown is shared by all stakeholders, a myriad of unforeseen issues can occur causing delays or inaccuracies. Below are some common challenges I encountered during the close process and tips for mitigation.

• Unreliable or inconsistent data: Depending on the quality and accuracy of the source documents, manual data entry may introduce conflicting or inaccurate data. A key solution here is to ensure that source documents are readable and consistent, and that data entry staff includes enough double checks. Automation is also a great tool for ensuring data accuracy.
• Insufficient resources: During the peak hours of month-end, year-end, and fiscal close, securing enough resources (usually people and software) can be difficult. Planning ahead helps anticipate these needs, while using software and automation can help streamline the process.
• Inefficient Processes: It is important to have a tight, well-defined and repeatable process that eliminates redundancy and waste. Streamlining your reconciled checklist and introducing checkpoints and quality control measures (such as reconciliations) can help identify and correct processes and errors.

Overall, managing the tight process can be a difficult task. However, with proper planning and process improvement, it can become a more strategic and effective goal for the organization.

What tools can be used to manage the accounting close process?

Managing accounting-like processes requires effective tools to support efficient and accurate operations. The right suite of tools can be used to automate data entry and improve accuracy. Examples of such tools include automated software solutions, spreadsheets, and journals.

Automated software solutions: Automated software solutions provide complete control and organization of the accounting close process, providing detailed insights and data analysis. Automation greatly reduces the potential for data entry errors and increases the speed of analysis and the closing process. For example, Oracle customer and cloud customers automate financial data collection, provide streamlined reporting, and help manage and close the process faster.

Spreadsheets: Spreadsheets are useful for organizing small amounts of data, such as financial statements, for quick reference. They allow data to be analyzed and visualized in various ways, tracked over time and used for reporting and analysis. They are also easily exported and shared with various stakeholders.

Journals: Journals are a key part of keeping accurate records of the accounting close process. They provide an opportunity to gather, document and store all process-related inputs, making it easy to track any accrued liability, the sequence of transactions and their effect on the overall financial picture. This enables effective management and analysis of the reconciled process.

Generally, the main elements of the accounting close process can be managed and monitored more effectively by adopting comprehensive automated software. This allows information to be stored on an easily accessible, user-friendly and secure platform. Additionally, other tools, such as spreadsheets and journals, can be used to complete the process.

How to adjust the monthly closing process to improve efficiency?

The monthly close process can be adjusted to improve efficiency through better organization, process automation, training and development.

Better organization

Organizing documents, assets, and templates in one place can centralize and speed up the process. Providing a timeline and specific instructions and deadlines helps employees and stakeholders stay informed and assess their current status. Additionally, having a time tracking system such as Trello can provide better visibility into the process.

Process Automation

Automating processes by scheduling shared tasks connected to accounting software can streamline recurring activities. This can be done by integrating the accounting software with other applications such as the payroll and loan origination system, which can make it easier to connect the programs.

Training and development

Training and development of staff and stakeholders can significantly reduce the time spent communicating and interpreting reports. Also, introducing strong communication systems can create an effective channel for interaction with necessary stakeholders and avoidance of bottlenecks. In short, better organization, process automation, training and development are things that can help adjust the monthly close process to improve efficiency.

What are common best practices associated with the annual close process?

The annual closing process is the process of formally implementing the previous year’s accounting period and preparing the necessary financial statements. It is important to manage this process correctly to ensure correct results and high levels of accuracy. Below are some common best practices associated with the annual close process.

• Review and document all closing processes: Close all accounts and ensure all journal entries and postings are complete. Use an audited process and review to ensure accuracy.
• Close your books on time: Sufficient dispatch to complete the close process properly ensures that the financials are closed accurately and within the allotted time frame.
• Backup data and evidence: It is best practice to back up transitional documents and data in case it is needed for the audit or if errors occur.
• Develop a Closing Checklist: Creating a closing process checklist lists the steps and serves as a reminder to ensure that all parts of the closing process are completed.
• Communicate with stakeholders: It is important to keep stakeholders informed of the closing schedule. Be sure to document all communications and be aware of external deadlines.
• Make sure the finances are accurate: Thoroughly analyze all the financial data produced by the tight process and examine all possible discrepancies.
• Ensure closing procedures are well controlled: Establish controls over the annual closing process designed to ensure accuracy and eliminate errors.

By following the best practices and approaches above, the annual close process can be managed and completed efficiently without errors. The resulting financial statements can be faithful to the accuracy.

Conclusion

Having a robust, accurate and timely tightening process is essential for any organization. Implementing the techniques and tips above can help ensure a successful monthly close, prevent errors, and improve accuracy. Challenges along the way are inevitable, but by making the necessary preparations and upgrades, you’ll be more equipped for a successful close.