The goal of closing the books each month is to lock the general ledger (GL) from future transactions. To accomplish this, we need to make sure that all transactions relating to the period have been recorded. This includes identifying and booking accruals, capitalizing prepaid expenses, depreciating fixed assets, and much, much more.
When you look at this long list of tasks, you might start to dread the month-end close. And the stress can be further compounded by the pressure on controllers and accounting teams.
Executive teams always want to make decisions based on the most current financials, which invariably means accounting departments are called upon to be hyper-efficient. The pressure to close the books fast, for both the month and year end, means we as accountants can't approach it as an afterthought.
With a few changes to your procedures, you can transform your close process from a repetitive, time-consuming task into a streamlined, efficient process free of errors.
Let’s look at some month-end close best practices to optimize the process.
1. Standardize your close process
Creating a checklist of procedures that must happen each month helps accounting teams close efficiently and accurately. Consistency month after month speeds up the close and reduces errors of omission.
The necessary closing procedures vary from business to business, and your checklist should be tailored to your specific process. Your industry, management accounting needs, external financial reporting requirements, and company-specific tasks will determine the items on the list.
That said, all close checklists should accomplish four things:
- Make sure all transactions are recorded.
- Calculate and record adjustments (accruals, allocations, reclassifications, etc.).
- Reconcile your subledgers to your GL.
- Prepare reports and look for things that are out of the ordinary.
Our free monthly close checklist Excel template gives you a head start. You'll see that it breaks down your financial month-end close goals and puts them into steps and procedures that you can customize to fit your business needs.
Here is an example of what a standardized checklist should look like:
Record transactions
- Review sales contracts to ensure all receivables and revenue are recorded.
- Ensure expense reports are completed.
- Review inventory receipts for any inventory received with no accompanying invoice.
- Make sure payroll has been processed.
Calculate and record adjustments
- Make the payroll accrual if necessary.
- Reclassify unearned revenue.
- Record lease accounting entries.
- Identify any other necessary accruals (legal, consulting fees, interest, etc.).
- Record amortizations for prepaid expenses.
- Record fixed asset depreciation.
Perform revenue or expense allocations
- Reclassify current and non-current assets and liabilities.
Reconcile records
- Reconcile material balance sheet accounts to the relevant subledger.
- Create reports and analyses.
- Perform flux analysis to identify and explain significant changes from the prior period.
- Assemble and distribute financial statements (if applicable).
2. Automate your close process
Once you have a standard close process in place, you can start to automate the repetitive manual tasks. Automation provides three key benefits:
Time savings
Each automated task is a task that your (probably already overworked) team doesn’t have to worry about, leading to a faster, smoother close. By reducing your team’s workload, you can also reduce stress and burnout, leading to a better work-life balance.
Fewer errors
Automation eliminates the element of human error inherent in repetitive calculations and processes. If you test your automation well and review the results, you can eliminate the risk of minor errors that add up to big headaches.
Better judgment on estimates
Automation frees up time for your accounting team to focus on the riskier areas of your ledger and put more effort into those estimates that require professional judgment.
Automation takes standardization to the next level by eliminating the need for manual work, which is prone to human error, to perform each step.
How to automate the monthly close in NetSuite with NetClose
If you use NetSuite, NetClose is the best way to automate the close within your core financial system. Automating within your ERP allows you to unlock efficiencies that are not possible from standalone solutions.
NetClose is a SuiteApp that adds powerful functionality to your NetSuite implementation, including:
Automated reconciliation and substantiation
Completely automate all tasks related to reconciliation, amortization, and accruals. This means your team can say goodbye to manual tasks and focus on more strategic work.
Embedded close checklist
Create your task list in NetSuite and assign tasks by existing users and roles. This streamlines and centralizes the process, allowing for more transparency and efficiency.
Detailed flux analysis
Identify fluctuations using automation tools and then drill down to the individual transactions in the core financial system for detailed analysis.
Amortization and accrual subledgers
Bring these important subledgers into NetSuite so they can be automatically included in closing calculations.
These are just some of the ways NetClose helps users streamline the monthly close process. For more, check out our customers’ favorite time-saving features.
Start improving your month-end close process with NetClose
Standardization and automation enable your team to achieve a smooth month-end close process and reclaim the time previously spent on manual tasks.
An automation solution like NetClose can be a game-changer, fostering better team collaboration and more streamlined workflows.
Take a self-guided product tour to discover how it can simplify your month-end close, or reach out to our team for a personalized demo.
