Best practices for the month-end close process
When everything goes smoothly, the month-end close seems just a routine process that doesn’t catch much attention from the business. But, if the business gets involved in regulatory issues, such as facing fines, penalties, or any legal actions, the month-end close process stands out to be one of the responsible factors contributing to those consequences. How to avoid this?
Many young CPAs start their accounting career involved in the month-end close process. Therefore, executing the month-end close with the utmost care is imperative. You must adhere to the recommended practices for that. In this blog, we'll talk about the finest practices to stick to so you can keep on top of the month-end close.
1. Establish a clear month-end close timeline
Establishing a clear timeline to ensure a mouth month-end close would be important. In the beginning, it is only sometimes feasible to consider how much time each task can take in the month-end close process. You can set a rough timeline as per your knowledge. Once you have a solid grasp of how things operate, you can establish a standard timeline.
Define specific deadlines for each task involved in the closing process. Communicate the timeline to all the fellows involved in the month-end close process. It allows you to set sufficient time for completing essential activities like reconciliations, financial reporting, and analysis.
2. Maintain accuracy
Accurate and up-to-date accounting books are the foundation of a successful month-end close. Ensure all transactions are accurately recorded in the appropriate accounts with supporting documentation before completing the month-end close. Reconcile the accounts on a regular basis, and address any inconsistencies right away. It helps to minimize the chances of error in your books and enables a smoother month-end close.
3. Streamline reconciliation process
Reconciliation is the process that allows you to identify any anomalies in your accounts. Even though it sometimes takes a lot of effort, streamlining it can help the month-end close run more quickly. You must use some cutting-edge automation tools and technologies for the reconciliation if you want to maintain error-free accounting books. Automation tools can match transactions, verify balances and identify discrepancies effortlessly. You can increase productivity and save hundreds of hours using automation tools during the month-end close.
4. Review the financial statements
Reviewing the financial statements for the month is an opportunity that comes with the month's end close. Identify any irregularities and unexpected trends so they can be dealt with immediately. It allows you to generate accurate reports and lets you set long-term goals on the base of the correct financial data. Additionally, reviewing the books can assist in pinpointing areas that require improvement and helps you make informed decisions for future planning.
5. Learn from the mistakes
You might not be familiar with the ins and outs of the month-end close process if you are new to the profile. Therefore, there may be a risk of errors. You can brush up on your skills and obtain suggestions from fellow accountants. If your firm is using any automation tool, it will be helpful to take note of the key points that can be crucial during the month-end close process.
6. Manage your time
You must plan out the entire process in advance in order to complete the month-end close on time. Find out approximately how long it will take to perform each task. To increase productivity, schedule your days and allot a certain amount of time to each work. You better prepare appropriately and manage your time because any job done without a plan is merely chaos. Focus your attention on the most important tasks to finish by identifying them. Put tasks in order of importance depending on how they affect the close process.
Delegate some of the tasks to other team members who can handle them, if at all possible. It will facilitate workload distribution and ensure the timely completion of assignments.
7. Foster collaboration and communication
Collaboration and effective internal communication are essential for a successful month-end close. Encourage cross-functional teams to collaborate, share the necessary information, and resolve the issues collectively. Establish regular meetings to discuss progress, address challenges, and provide updates if necessary. Improved communication guides you to precise end goals. If you wish to improve collaboration during the month-end close, use close management software.
8. Invest in training and development
The accounting teams' continued training and development are essential to a successful month-end close process. Learn everything you can about the month-end close process, including software and emerging business trends. Teams with enough training perform better, are more accurate, and can adjust to shifting demands.
9. Leverage technology solutions
People no longer manually review and close books. Finding errors in books manually takes a long time, and there may still be undetected errors. Embrace technological solutions that can help to streamline the month-end close procedure. Xenett is the highly recommended review and close management software for a productive month-end close. Using Xenett during the month-end close can assist you in eliminating the tedious work of repetitive tasks. You can also generate precise reports and acquire actionable insights. Adopting technology boosts efficiency while also reducing errors and increasing data security.
10. Conduct post-close evaluation
When you invest important hours in the month-end closure, you don't want it to come out with undetected mistakes later on. That is why a post-close evaluation is necessary that allows you to discover areas for improvement. Evaluate the execution of the month-end close procedure, analyze issues encountered, and obtain reviewer input. Use the input to improve current practices and future month-end closes.
The bottom lines:
In conclusion, businesses must apply these practices for the month-end close in order to ensure a seamless and successful month-end close process. By implementing these practices, companies can streamline accounting procedures, optimize financial performance, and make well-informed decisions for future growth. Remember that a successful month-end close lays the groundwork for a productive and fruitful month ahead.