What is the Month End Close Process? Best Practices & Tips

It’s like pay day - in the sense that you can expect it every month, but you also have to prepare to get it done right. The month end close process involves steps that ensure a company’s financial activities have been properly documented before closing the books.

It can take weeks to complete with time-consuming work, or the month-end close timeline can be expedited and enhanced using finance automation software like SolveXia.

Here, we’re going to share what the month-end closing process encompasses and how your business can make it better for all involved.

Coming Up

What is the Month End Close Process?

Why is the Month End Close Process Important?

How is the Month End Close Process Performed?

What are the Steps of the Month End Close Process?

How Long Does the Month End Close Process Take?

What Does Accounting Need for the Month End Close?

What are the Challenges of Month End Close?

Why Optimize and Improve Month End Close Process?

What are Best Practices of Month End Close Process?

What is a Month End Close Checklist?

How Finance Automation Helps with Month End Close?

Closing Words

What is the Month End Close Process?

The month end close process is a systematic approach of maintaining business records and reviewing documentation to ensure its accuracy.

It involves performing meticulous review of: the company’s balance sheet, intercompany trades, and additional internal documents like income, expenses, and bank statements. A crucial piece of the month end close process is also executing account reconciliation.

If you’re in finance, you’re surely familiar with the month-end closing process. And, if you’re reading this, you have probably dealt with your fair share of struggle in meeting the monthly deadlines.

That’s painfully true if you’ve been doing all this work manually. The sheer amount of data, transactions, and various formats require immense time to manage. This is particularly true if you have high volume of transactions from multiple payment providers like Amazon, ebay, Stripe, Paypal etc.

Alternatively, you could save time and prevent errors by using a finance automation tool like SolveXia that automatically combines your data, performs transaction matching, and notifies you for any amendments that are necessary.

SolveXia helps your business to save time, improve accuracy, and improve compliance. Instead of your team spending countless hours and weeks compiling data and manually working with it, they can spend their time offering valuable insights and strategic advice to the business!

Why is the Month End Close Process Important?

While the month end close process may be a regulated requirement for your business, it’s also of great value for internal operations and decision-making. It helps business leaders and stakeholders understand how the company is faring at any point in time.

By concluding the month end close process in a timely and consistent manner, you are able to:

• Spot and prevent fraud
• Locate account discrepancies
• Fix mistakes
• Perform the year-end close more easily
• Maintain up-to-date financial records
• Streamline tax filing
• Reduce stress

How is the Month End Close Process Performed?

Every company has their own way of executing the month end close process. Regardless of if you manage it by hand or by utilizing the power of an automation solution, the necessary steps include reviewing, recording, and reconciling.

As a best practice, it’s helpful to stay on top of transactions daily and keep them neatly organized. When you have finance automation software in use, this is taken care of for you so it becomes something you never have to think about.

This is increasingly helpful as transaction volume grows, especially when companies leverage multiple payment processors (that then all have to be reconciled).

The accounting team is in charge of taking care of the month end close process. They’ll have to perform various types of account reconciliation to make sure records are in order on bank statements, the balance sheet, cash accounts, expense accounts, and the like.

With an automation software like SolveXia, many of these time-sucking tasks can be handled automatically. This way, your team’s time is freed up to spend on higher value-added tasks for the organization.

What are the Steps of the Month End Close Process?

Let’s dive a bit deeper into the required steps of the month end close process. This way, it becomes easy to see how and where an automation software like SolveXia can transform the way your business flows.

1. Collect and Record

At first, you’ll need to collect all your data to make sure that all transactions have been properly recorded. This involves your ERP, payroll, taxes, employee vacation, interest expenses, fixed assets, inventory, etc. It also requires you to post journal entries to cover amortization and depreciation.

2. Close Books

After you reconcile all your accounts and ensure that transactions are in alignment, you can close the accounting period’s books. Don’t forget to reconcile prepaid accounts and intercompany accounts (if you’re operating a parent company to subsidiaries).

3. Analyze and Report

Review your account analysis with stakeholders to review how money has been spent and how revenue is being generated. Once everything is in order, prepare any reporting and documentation for internal/external audits.

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With a tool like SolveXia, all your data will be organized and centralized for you automatically. The system connects to your existing software and legacy systems to pull together the required information.

Then, SolveXia conducts transaction matching with utmost accuracy and in less time than it would take to manually do so. By the end of your reconciliation process, you can generate reporting for any stakeholder and even customize dashboards to visualize data analysis.

How Long Does the Month End Close Process Take?

The month end close process timing depends on different variables. For example, how many people are in your accounting department? How many transactions do you deal with per month? What systems do you use? Are you performing it manually or automating the process?

That’s just an idea of what can affect the time it could take. Per a survey published via CFO, the top 25% of companies responded that they could close in 4.8 days or less, whereas others needed more than 10 calendar days to get it done.

Conservatively, you can say that most companies close in about 6.4 calendar days. But again, the number can vary greatly.

What we can say with immense certainty is that automation software (such as SolveXia) will enhance your team’s productivity and help you to complete the month end close process in minutes instead of days.

What Does Accounting Need for the Month End Close?

In order to conduct the month end close process, your accounting team needs to have their hands on a lot of different information. For example, they need access to:

• Total revenue
• Petty cash total
• Financial statements
• Inventory count
• Total fixed assets
• Balance sheet
• Income and expense accounts
• General ledger
• Bank account information

As you can see from this list alone, there are a lot of moving parts. It’s necessary to keep all data organized and make it available to those who need it to prevent bottlenecks and delays.

With automation software implemented, you can connect all data systems and grant access controls.

What are the Challenges of Month End Close?

When your accounting team is left scrambling to get their hands on the information they need (like the list above), it delays the whole process.

While it is a direct and clear process, the month end close is often filled with its fair share of challenges (but it’s mostly due to organization rather than a lack of experience or understanding).

Consider these common hurdles:

1. Decentralized Data

As described, decentralized data is one of the greatest challenges during the month end close process. When you store your financial statements across desktops and spreadsheets, it creates a major setback for the professionals who need the information readily available to work with.

2. Unclear Process

The month-end close process varies by business. It’s crucial to have a set (and preferably standardized) process that’s defined before it begins. This way, employees are properly trained and aware of their responsibilities.

3. Manual Mistakes

With manual records and disparate spreadsheets, the chances are high that there will be errors in the documents.

4. Lack of Visibility

With the many moving parts, the accounting team (and stakeholders) wish to be aware of where the process stands. With automation software, you gain internal control and transparency to track the process’ status.

Why Optimize and Improve Month End Close Process?

The month end close process is a recurring aspect of conducting business. So, all it takes is a single time to optimize it and then you get to reap the ongoing benefits every month thereafter.

By optimizing the month end close process, you get to add value to your business. You gain deeper and more improved analysis of how your business spends money and where it’s making its money. Leadership gets access to this pertinent data more rapidly, which can hasten important decision-making.

Additionally, your employees can free up their time to work on higher value tasks that breed greater employee satisfaction levels (and thus, increased retention).

What are Best Practices of Month End Close Process?

To boost your month end close process, check out this list of best practices:

1. Hold Team Meetings

Before and after you conduct the month end close process, communicate with your team to discuss their pain points and where improvements could be made. By gauging this feedback, you can make great strides in optimizing the process.

Additionally, having these conversations helps to set clear responsibilities and hold each person accountable for what they are expected to do.

2. Focus on Accuracy

While speed is an important factor in the process, accuracy is still the most paramount consideration. You never want to sacrifice accuracy for quickness. Luckily, with automation software, you don’t have to because it grants you the best of both worlds.

3. Leverage Technology

Software like SolveXia is built for complex financial processes like the month end close process. By utilizing automation software, you can define, streamline, and perform this non-negotiable process with less stress and fewer challenges. Not only will stakeholders thank you, but your team will be pleased with the results, too.

What is a Month End Close Checklist?

Given the multiple steps and data involved in the month end close process, a month-end closing checklist makes sure that nothing gets left behind.

Remember to check the following:

• Cash
• Inventory
• Fixed assets
• Accounts payable
• Accounts receivable
• accrued taxes
• Intercompany accounts
• Notes payable
• Accrued payroll and vacation
• Expenses

When you use a tool like SolveXia, you can input all of these accounts and connect them within the software so you don’t have to think twice if you cross off the box. The system handles it for you!

How Finance Automation Helps with Month End Close?

Automation software removes bottlenecks and key person dependencies within the month end close process. You get to either leverage pre-designed workflow templates or create your own using drag-and-drop functionality.

Once you’re ready to run the process, simply trigger it to begin and let the software do the work. If any exceptions are to arise, rest assured that you’ll be alerted to investigate.

After the reconciliation process is complete, the system will keep records of everything that took place. This way, any internal or external audit report can be automatically run. Plus, you’ll end the process with a neatly organized report and access to dashboards to review analytics.

As you can imagine, you will save time, reduce errors, and overcome the challenges that you’ve faced each month when performing this process manually. The best reconciliation tools and finance automation software give you peace of mind and more time to focus on high-level responsibilities.

Closing Words

There’s no time like the present to take your month end close process to the next level. Remove inefficiencies, forget about key person dependencies, and focus on streamlining this critical accounting process with the aid of an automation tool like SolveXia.

Want to see how the software works in action? We’re ready to show you - request a demo to get going!