The month end close is one of the most important accounting processes for businesses of all sizes. For example, you have your module for accounts payable and another department for accounts receivable. The closing process requires reconciliation of these separate parts together.

All team members should take turns independently reviewing each statement during this process. Pay particular attention to data such as cost of goods sold, net income, and depreciation. Once everyone is satisfied that the statements are complete and accurate, they can be formally submitted. Most accounting teams use some sort of month-end close checklist and have some sort of month-end close process.

What is a month end close process?

In fact, the tasks may be spread across regions, and with the rise of remote working, you’ll need to communicate more than ever so that everyone is looped in. Automation solutions simplify this by offering visibility into the process at every step. According to data from the American Productivity & Quality Center, the Bookminders: Outsourced Accounting and Bookkeeping Services median account close process for 2,300 surveyed organisations was 6.4 days, back in 2018. In a survey from 2019 out of Ventana Research, 46% of organisations were closing in four days. Alternatively, you can worry less about this step when you implement an automation tool to handle your account reconciliation for you.

The flowchart below provides a visual overview of the month-end close process and the key activities that take place in each step. Since month-end closing is a routine activity, every time you encounter a roadblock or problem, note it down and try to address it effectively. For example, if collecting data takes more time than planned, try to keep everything organized throughout the month.

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Most organizations take around 5-10 working days to complete the month-end close. For the month-end close, companies collect all the necessary financial information to review and reconcile their records at the end of every month. It helps keep accurate records and identify any discrepancies well before the yearly close. It also gives businesses a bird’s eye view of their financial health and makes planning easy with actionable insights. The https://kelleysbookkeeping.com/bookkeeper360-review-2023-pricing-features-more/ ensures you have information about your company’s financial standing. It’s crucial for helping you make short-term decisions, in addition to helping you work towards long-term goals.

How Automation Streamlines Month End Close Process?

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. Not everything of value in the organization can be set to a cash amount. Fixed assets—which can include equipment, property, and vehicles—add long-term value to your business. Reconcile your cash accounts first, which are easier to process since discrepancies and mistakes are apparent when you’re dealing with cash.

• Together with expanding roles, new expectations from stakeholders, and evolving regulatory requirements, these demands can place unsustainable strain on finance and accounting functions.
• Automation is the key to reducing the time and effort required for the month-end closing process.
• Here is a month-end close process flowchart to visualize some of the key steps and processes.
• Energize your accounting team by creating capacity with automation.
• Fixed assets include buildings, vehicles, equipment, and intangible assets like your brand name.
• Closing entries prepare you for the next accounting period as the balances are zeroed out from a temporary account and transferred to a permanent account.

The goal is to show that the value of the assets and liabilities is true as they appear in your client’s balance sheet. Bear in mind that this only applies to businesses that use the accrual method of accounting. At the end of this step, you will have reconciled the difference in the time of payment or expense for all goods or services by their actual delivery in the general ledger. Accurate month ends make completing the year-end quicker and more accurate, thanks to an effective month end process. How to create a business budget, the different budgeting approaches, and tips from top CFOs to ensure a structured and productive budgeting process. You can get your general ledgers prepared by Wishup’s virtual bookkeeping assistants.