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Practical Steps to Optimize Your Month-End Close

By Citrin Cooperman’s Digital Services Practice .

You are not alone if the thought of tackling the month-end close process brings you a good deal of discomfort, especially when it is a crucial part of managing an accounting firm or department. Admittedly, the month-end close can be time-consuming, but its importance cannot be overstated in ensuring the accuracy and reliability of financial data. With the right approach and organization, however, it is possible to streamline and expedite the process.

The month-end close process

Recording, reconciling, reviewing, and finalizing the financial data from the previous month constitutes essential steps in the month-end close process. It is safe to say that accountants and bookkeepers are fully engaged in their work during this period.

While the specific procedures may vary among businesses, here are some common components of an accounting firm’s month-end close process:

  • Tracking all outstanding invoices
  • Reviewing bank, credit card, and loan statements
  • Conducting account reconciliations
  • Managing accounts receivable and accounts payable
  • Conducting inventory counts
  • Comparing actual spending with the company’s budget
  • Managing fixed assets
  • Handling mortgage and insurance entries
  • Tracking accruals and prepayments
  • Making general ledger entries
  • Generating financial reports
  • Closing the accounting period in the software system

The primary goal of the accounting team during the month-end close is to generate precise financial data to safeguard the business against financial challenges.

Why is the month-end close process so important?

The month-end close process is indispensable for businesses of all sizes, whether they are small startups or massive corporations. By carrying out this process, you can meticulously track every transaction your company undertakes throughout the month, simplifying the detection of any fraudulent activities or inconsistencies in the accounts.

Moreover, consistent execution of the month-end close streamlines the year-end close process, alleviating the need for last-minute rushes during the hectic year-end season.

Here are some key benefits of the month-end close process:

  • Identifying discrepancies in your financial records
  • Generating precise and reliable financial data
  • Facilitating informed business decision-making
  • Preventing potential instances of fraud
  • Streamlining time-consuming tax filing procedures
  • Ensuring a stress-free year-end close process
  • Simplifying IRS audit procedures
  • Enhancing tax-filing efficiency
  • Highlighting areas for improvement within the business
  • Cultivating a culture of organized workflow spaces

Streamlining your process

Despite significant advancements in accounting systems and associated applications, the financial close process often remains plagued by inefficiencies and unreliability, posing challenges for many companies. While finance traditionally focused on reporting outcomes, its role has evolved to encompass partnering with various departments to enhance decision-making, underscoring the importance of both timely and high-quality financial information.

As businesses move towards automation, the keys to an effective month-end close lie within the entire function. Streamlining this process not only grants quicker access to financial outcomes and enhances decision support, but also yields substantial recurring cost savings and more predictable results.

Here are a few steps that can help you optimize your month-end close process:

  1. Do the prep work

    Send an email notification regarding outstanding invoices. Reach out to your sales reps to prevent any revenue loss and to verify the accuracy of your sales pipeline metrics. Double-check the precision of all manual entries. Automatic posts do not need to be reviewed at this initial phase.
  2. Record monthly income and expenses

    Speaking of double-checking those manual entries, this is the time to ensure you have documented all income received from each revenue stream thought the month and address any missing entries. Review your client billing accuracy and take necessary steps to rectify any discrepancies.

    Take a close look at the following income cash items:
    • Sales revenue
    • Investment income
    • Rental income
    • Debt repayments to your business
    • Other sources of income

    Develop a routine of promptly recording business expenses. If immediate recording is not feasible, aim for weekly entries to simplify the month-end process.

    Key expenses to track include:
    • Payroll
    • Insurance
    • Rent or lease payments
    • Utility bills
    • Payments to suppliers
    • Travel expenses
    • Business loan interest

    Verify that each debit and credit entry is correctly posted to the relevant account. Ensure accuracy in journal entry postings to the general ledger, as errors can have enduring adverse effects on your business.
  3. Conduct flux analysis and adjust

    Some refer to this practice as “flexing your financials.” Flux analysis allows you to scrutinize and verify monthly and quarterly month-end closing outcomes against the company’s growth objectives and projections. Any anomalies that require adjustments could potentially escalate over time if you do not catch them early.
  4. Assess your fixed assets

    Ensure a prompt audit of your fixed assets, encompassing vehicles, commercial structures, and various equipment types. Intangible assets such as brand names and trademarks are also part of this evaluation. Assess both the value and condition of each asset.

    Follow these steps to assess your fixes assets:
    • Document all acquisitions and disposals of fixed assets.
    • Account for depreciation and amortization expenses.
    • Evaluate the condition of fixed assets and initiate necessary measures.
    • Review the maintenance and repair records of fixed assets.
  5. Meet deadlines

    While prioritizing quality over speed is crucial, it is equally important to plan ahead to meet your month-end financial reporting deadlines. If you anticipate the one-week closing process timeframe is unattainable, communicate this beforehand.

    Maintaining a consistent schedule for releasing financial statements each month can enhance your team’s time and task management. Implementing automated accounting solutions can transform day-zero financial close into a reality, facilitating prompt and precise decision-making.
  6. Create a month-end close checklist

    Utilize a month-end close checklist to allocate responsibilities and establish a timeline for task completion.

    You can also utilize pre-designed templates for financial statements, reconciliations, and other documentation to accelerate the month-end process while ensuring consistency and accuracy.
  7. Choose quality over speed and look for areas of improvement

    The month-end close is the principal accounting processes for any business. Rushing through it and making errors will not serve you well, especially when relying on these statements for your year-end close. Precise monthly financial reports enhance transparency and ensure key performance indicator (KPI) tracking accuracy.

    Given that month-end closing is a recurring task, it is essential to document any hurdles or issues encountered and address them effectively. For instance, if data collection consumes more time than anticipated, strive to maintain organization throughout the month.

    Exploring automation solutions that facilitate data aggregation and segmentation could prove beneficial. Citrin Cooperman offers solutions to assist with financial close automation, featuring project templates, close task management, and accounting anomaly detection.

Your checklist for the month-end close process

Now that you have an idea of places where you can streamline your month-end close process, here is a checklist to help you along the way.

Step 1: Make a closing schedule

When month-end close is on the horizon, many employees report working extended daily hours. However, this can be mitigated by establishing a closing plan, serving as your roadmap for this unavoidable period that comes month after month. Setting transparent deadlines helps to keep everyone aligned and minimizes eleventh-hour rushes.

Step 2: Record your sales

Ensure that every sale made is recorded. This stage is pivotal in understanding your business’s performance. Thus, ensure all checks, cash, merchant account transactions, and customer account deposits are logged to attain precise revenue totals.

Step 3: Reconcile expenses

Match each expenditure with its respective receipt or bill meticulously. Verify supplier invoicing statements against processed payables and billing notices, and do not forget to document any credits or outstanding expenses. This process is crucial to guaranteeing payment only for received goods or services, leaving no room for oversight.

Step 4: Record petty cash

Monitor minor cash expenses diligently. While they may seem insignificant, they play a crucial role in maintaining precise financial records. As such, collect all petty cash receipts detailing miscellaneous expenses and compile the monthly total for accurate documentation.

Step 5: Document customer invoices and payments

Securing all invoices and meticulously tracking payments are vital for sustaining a robust cash flow. Record all outstanding customer payments and invoices or credits precisely in your accounting system to keep accounts receivable up to date.

Step 6: Examine assets and liabilities

Capture a comprehensive overview of your assets and liabilities. Reconcile alterations to liabilities and assets, including accrued expenses, loans, deferred revenue, and equipment.

Step 7: Reconcile bank statements

Review your records against those of your bank to identify any disparities. This process ensures alignment between both sets of data.

Step 8: Tally inventory

Any businesses dealing with physical products need to maintain precise inventory records. Correct inventory counts are essential to avoid both understocking and overstocking. Investigate any instances of product loss or damage diligently.

Step 9: Reconcile income and payroll

Verify that recorded income aligns with payroll costs. This step is pivotal for understanding where you are with your budget today and facilitating future planning.

Step 10: Prepare your financial reports

Compile monthly reports that analyze profit and loss, balance sheet, cash flow, and KPIs for business review and planning purposes. These reports transform. Your efforts into valuable insights, explaining the financial narrative of your business.

Optimize your month-end close processes with Vena and Citrin Cooperman

At Citrin Cooperman, we are proud to say we offer Vena, a solution that can make all of the above easier for you and your team. From templates to automation and everything in between, we are excited to take some of the heavy lift off your staff and give them time back in their days so they can focus on tasks that require human intervention.

Our team’s goal is to help your business improve efficiency, gain access to accurate, real-time data, and make well-informed decisions by implementing corporate performance management (CPM) software. Vena Solutions is a leading CPM software focused on bringing all your decision support together in one place by automating and effectively managing financial workflows.

This case study demonstrates how Citrin Cooperman worked with a client to automate financial and operational reports with Vena Solutions that took reporting from 100 hours per week to just seconds, saving the business $125,000 per year.

Register for a Vena demo or touch base with our team to learn how we can help you streamline your month-end close.

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