How to Build a Better Month-End Close Process

The goal of closing the books each month is to lock the general ledger from future transactions. To accomplish this, we need to make sure that all transactions relating to the period have been recorded. Accruals need to be identified and booked, prepaid expenses should be capitalized, fixed assets need to be depreciated, and much, much more.

I recommend that you first download our excel close checklist and customize it for your needs. Click here to download our free close checklist

Once you download the monthly close checklist, 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 scenario.

How Controllers Can Close their Books Faster While Eliminating Errors

Your executive team always wants 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 month and year end, means we as accountants can't continue approaching closes as an afterthought. By their nature as a repetitive, monthly time investment, close processes are a great area to optimize.

Creating a checklist of procedures that must happen each month helps accounting teams close efficiently and accurately. Consistency month after month speeds up close and reduces errors of omission.  

Keep in mind the correct procedures for closing vary from business to business, so you will need to create your own checklist. Industry, management accounting needs, external financial reporting requirements and company-specific processes will affect the items on the list. 

That said, all close checklists should accomplish these 4 things:

1. Make sure all transactions are recorded.  

2. Calculate and record adjustments (accruals, allocations, reclassifications, etc). 

3. Reconcile your subledgers to your GL. 

4. Prepare reporting and look for things that are out of the ordinary

1. 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 processes

2. Calculate and record adjustments 

• Make a 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 

3. Perform any revenue or expense allocations 

Reclassify current and non-current assets and liabilities

4. Reconciliation

• Reconcile material balance sheet accounts to the relevant subledger 
• Reporting and analysis 
• Perform flux analysis to identify and explain significant changes from prior period 
• Assemble and distribute financial statements (if applicable) 

Or you can build from this downloadable excel template for monthly book closing:

Next, automate your close process

Once you have a standard close process, you can start to automate. Automation provides 3 key benefits: 

1. Time savings 

   Each automated task is a task that your (probably already overworked) team doesn’t have to do, leading to a faster, smoother close.

2. Fewer errors
   

   Automation eliminates human error inherent in repetitive calculations and processes. As long as you test your automation well, it will not make the minor errors people make that add up to big headaches. 

3. Better judgment on estimates

   Automation frees up time for the accounting team to focus on the riskier areas of your ledger and puts more effort into those estimates that require professional judgment

Automation takes standardization to the next level by eliminating the need for humans (prone to human error) to perform each step.

How to automate 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 stand-alone solutions. 

NetClose is a SuiteApp that adds powerful functionality to your NetSuite implementation: 

1. Automated reconciliation and substantiation 

   Completely automate all tasks related to reconciliation of records.

2. Embedded close checklist

   Create your task list in NetSuite so it links to each task (saving time) and assign tasks by existing users and roles. 

3. Detailed flux analysis 

   Identify fluctuations using automation tools and then drill down to the individual transactions in the core financial system for detailed analysis.

4. Amortization and accrual subledgers 

   Bring these important subledgers into NetSuite so they can be automatically included in closing calculations

5. Expanded NetSuite close customization 

   Close the right books at the right time with customization 

Bottom line: You can save time and improve confidence in your close by creating a standardized checklist based on the one above. Once you have standardized, consider the benefits of automating with NetClose. 

To get started, build from this downloadable excel template for monthly book closing.