BlackLine’s glossary provides descriptions for industry words and phrases, answers to frequently asked questions, and links to additional resources. Whether new to BlackLine or a longtime customer, we curate events to guide you along every step of your modern accounting journey. Accelerate adoption and drive productivity and performance.One of the critical success drivers for any software technology is effective user training and adoption. Whether you are deploying for the first time or creating a sustainable education program for maximum value creation, explore how you can take the next steps to upskill your users. While the responsibility to maintain compliance stretches across the organization, F&A has a critical role in ensuring compliance with financial rules and regulations. Together with expanding roles, new expectations from stakeholders, and evolving regulatory requirements, these demands can place unsustainable strain on finance and accounting functions.

• As with Step 1, this part of the month-end close is much more transparent, accurate, and swift if you’ve been recording and tracking spend automatically in your accounting system.
• In 2017, the average accountancy team reported that month-end close takes more than 8 days.
• Instead, you can utilise an automation solution that can perform the data collection for you.
• A properly and consistently executed month-end close is a fundamental practice for a well-run business operation.
• Additionally, tracking down various invoices or receipts needed to prepare account statements can be an extra challenge during month-end close.

Reconcile your bank statements with the general ledger entries for the period. This lets you know if there are any errors in your books or if money has been added or subtracted improperly month end close process by someone else who has access to them (like an employee). The first step in the month-end close process is to set up closing dates and define month-end close procedures.

Step 8 – Create Financial Statements

Proper preparation is another important factor in ensuring the close process is conducted quickly and accurately. One of the first steps in a systematized close process should be tying up the month’s loose ends. When preparing to close, contact department heads to check on budget adherence, unexpected expenditures, anticipated last-minute sales, and more. Verify anticipated vendor payments to ensure receivables will arrive on time.

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Best Practices

The month-end closing process is complicated and might vary for every business. So, if the employees are not given adequate training, they may find it challenging to carry out the process efficiently. After collecting all the data, it needs to be cross-checked with receipts, bank statements, and other sources of information https://www.bookstime.com/articles/accounting-memphis-tn that the business might have. It is important to note that the month-end close is an official process to finalize the balance sheet numbers. So, in the future, it is unlikely that any changes will be needed to the data. Like all deadlines, the month-end close can be a source of tension for some organizations.

Cross-check your records during this step to make sure everything has been paid. Accounting systems aren’t homogenous entities; they usually come in modules covering specific purposes such as an accounts payable and an accounts receivable department. Part of the closing process is reconciling all these components together. If the financial documents required for the month-closing process are stored in different locations, it will be cumbersome to access them quickly. So, a centralized repository is recommended to ensure the smooth collection of data. And like any machine, it must be properly shut down at the end of the day.

How can you optimize month-end closing with AR automation?

Without centralized access to comprehensive financial data, teams often miss deadlines, work with incomplete data, or make inaccurate assumptions about their financial position. Due to the amount of moving parts and data required to perform the month end close process, it’s helpful to have a checklist for reference. No matter how capable or experienced your accounting team is, when it comes to performing manual data entry across multiple touchpoints, there’s the risk of manual error.

The big picture takeaway here is that the closing process costs you valuable time and energy which would be better spent on strategic decision making. You have the power to create better workplace satisfaction, create savings and turn a higher profit. Templates and checklists for every step in the process might sound incredibly taxing, but they can shave entire days off your month-end close process. In opposition to income, accounts payable is the money you spend each month on purchases and bills. You’ll be required to track how much you’ve spent and on which products or services, including via expense reports, invoice payments, and company cards.

Record incoming cash

So the $5,000 becomes a current liability and is placed in Accounts Payable, with a corresponding entry in the Office Supplies expense account. Next month, when payment is issued, an entry will be added to reduce cash by $5,000, along with a corresponding entry that drops the Accounts Payable balance by the same amount. Accruals are adjusting entries made to ensure that all transactions that take place within a given period (e.g., a month) are recorded properly. Remember, your specific procedures may vary based on your industry, accounting methods, available technology, etc. If you’re using a cloud-based, automated solution such as Planergy, many of these data sources will already be connected, organized, and ready for real-time access, manipulation, and analysis as needed.

Perhaps the greatest challenge when it comes to the month end close process is the inefficiency that can rear its head. In most cases, organisations will report that the inefficiency stems from the starting point, namely – the collection of data from multiple systems. There will likely be various tools and systems involved, especially because of the sheer amount of data required for the account close process. Yet, if you conduct the process manually and a key person is out of office, you run the risk of bottlenecks and key person dependencies. Beyond collaboration and transparency, automation tools also offer visibility into insights. This allows for leaders and stakeholders to make informed decisions and also set up triggers in the event of errors or impending business risks.

Each item on the list is often done through a separate spreadsheet by isolated individuals specific to their departments. When done the traditional way, these tasks are invisible to the wider finance function, and it can be difficult to integrate the work with the monthly closing process as a whole. Once the general ledger has been updated, the next step is to prepare the financial statements, which can be done either with compiled data in a spreadsheet or automation tools. Topics covered in these documents are typically a summary of the general ledger, profit and loss statements, and balance sheets.