The process will involve reviewing, recording, and reconciling business transactions so you can complete the necessary financial statements. According to research published in Forbes, most businesses have room to dramatically improve productivity and reduce time spent on low-value tasks. That means there’s likely ways to accelerate your monthly closing process, giving you more time to focus on your other priorities. 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.

Every task in the month end close process should have a responsible party or team. When you select an automation software like SolveXia, you can remove key person dependencies and help to clearly define roles. 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.

Reconcile Accounts

However, with proper planning and organization (which includes knowing what needs to be done), any business owner can successfully complete this important task. This is an important step as preparing cash flow statements and balance sheets will help you know the funds available to each business unit. For some companies, the Month End Close Process gets done “as we’ve always done it,” without a clearly documented plan or protocols. This is more likely to be the case at companies with smaller accounting teams, where the urgency for documentation hasn’t been as strong. The accounting close process also provides a comprehensive understanding of your business’ financial situation to anyone who needs it.

• If your business can’t handle monthly fluctuations in AP output without adding a whole new full-time employee to the team, you’ve got a manual labor problem.
• During pre-close meetings, the team should discuss follow-up items from the previous month’s post-close meeting and determine the current month’s close schedule and timeline.
• Once the research and documentation have been reviewed, the team is ready to craft monthly financial statements.

After getting these invoices from them, you need to regularly check that all transactions have been recorded properly in your accounting system before sending them back for approval or rejection. Review current financial documents for accuracy and reconcile them against existing records. Check that the total amounts mentioned in the documents match general ledger (GL) accounts and ensure there are no other discrepancies.

Where Accounts Payable Fits Into the Month-End Close Process

In fact, you can get started right now with a no-cost, no-obligation demo from our sales team. This journey can be better managed and even cut short when all the stakeholders involved are able to quickly communicate about the terms of service, due dates, reviews and approvals, and so on. Business owners and/or executives often rely on the numbers AP comes up with each month to help inform strategic decisions for both the near and far future. Here’s why it’s so important to put each of them into effect to create a modern workflow.

• This is determined by the number of hours worked, the rate of pay, and any applicable deductions or benefits.
• For accounts receivable entries, look at all the sources of revenue from loans to invoice payments.
• During your monthly close, cross-check your records to make sure you paid all bills and invoices.
• If so, these will need to be added before proceeding with the month-end closing procedures.

Monitor changes in real time to identify and analyze customer risk signals. Despite being very minor, these expenditures must be recorded and tracked like any other account. All of this data should be derived from daily financial records that have already been made by month-end. Apart from incoming cash data, there is other information that needs collecting, including inventory count, accrued expenses, and general ledger. As the client base and financial portfolio of an enterprise expand, manual monthly account closure can become unwieldy and impossible without automation. The productivity and satisfaction of employees increase when they spend time on interesting and rewarding aspects of their jobs, and this reduces employee turnover and enhances employee retention.

Update the accounts receivable and accounts payable

Automation software gives these teams awareness of financial activity throughout the firm, giving them a chance to provide input for purchasing decisions early on. Software easily records closing activities, who performed them, and what time, resulting in a convenient audit trail. Accounting professionals are able to verify that best practices are being followed and can trace back responsibility whenever mistakes are made. Identifying task dependencies will inevitably be an additional step for larger organizations. The mere act of going over your financial statements can give you intel into what you’re buying and whether you’re getting a proper return on your investment. They are also an indicator of overspending and other budgetary issues.

For example, if collecting data takes more time than planned, try to keep everything organized throughout the month. In post-close meetings, discuss what worked and what didn’t, and review assigned roles and responsibilities for the next month. Review any lessons learned, any variances or abnormalities, and entertain any proposed changes to the process. During pre-close meetings, the team should discuss follow-up items from the previous month’s post-close meeting and determine the current month’s close schedule and timeline.

Using estimates rather than exact calculations can shave hours or even days off the close. 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.

Also, the timelines depend on the specific situation of your company. The entries in your financial statements must match the entries from bankers, vendors, and other entities. As such, it’s a good idea to ask somebody who didn’t prepare your accounts to take a look at them.

Business is Our Business

Surveys and research over the years show the month-end process generally takes between 5-10 days. Some activities can be recorded or reconciled more frequently than monthly to help speed up the process at month’s end. The month end close process involves the recording, review, and reporting of the financial transactions that have happened in the period since the last close in the previous month.

• Automation ensures data is consistent across departments and compliant with regulations.
• Organizing the statements is just as important so that you aren’t scrambling to find them in the last few days of the month.
• To avoid mistakes, review your financial information before the month-end close.
• It’s neither glamorous nor particularly enjoyable for many, but month-end close is essential to the health and happiness of not just your accounting department, but your entire organization.
• This results in difficult and time-consuming corrections and additional reporting to research issues, adding to the complexity of the closing process.

In other words, you need to match and verify all transactions to the relevant bank, business, or vendor. For the month end close to go smoothly, all members of your accounting https://kelleysbookkeeping.com/ team should know what role they play and have the support they need. The month-end close is one of the accounting and finance team’s most important tasks.

Month End Close Process: The Essential Guide

Smaller companies may have fewer accounts while multi-nationals will have hundreds or thousands. Here is a month-end close process flowchart to visualize some of the key steps and processes. Companies come to BlackLine because their traditional manual accounting processes are not sustainable. We help them move to modern accounting by unifying their data and processes, automating repetitive work, and driving accountability through visibility. It’s time to embrace modern accounting technology to save time, reduce risk, and create capacity to focus your time on what matters most. Make the most of your team’s time by automating accounts receivables tasks and using data to drive priority, action, and results.

• 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.
• 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.
• Then assign responsibilities and determine deadlines for each step to help the team effectively manage the process.
• Month-end close is the accounting process of finalizing a company’s financial books and records for the month.