Streamline Your Month-End Close With Centri

Month-End Close Checklist & Best Practices

Your month-end close is a critical process for your business, ensuring the accuracy and completeness of your financial reporting. Many organizations struggle with inefficient, error-prone, and time-consuming month-end close activities, which can negatively impact the quality of reporting, compliance, and decision-making. In this article, we will review a month-end close checklist and explore some of the best practices for accomplishing a successful month-end close. By following these best practices, you can streamline your month-end close process, reducing your time to close, reducing errors and risks, and gaining more insights into your business performance.

1. Pre-Close

• Review list of outstanding checks
• Special attention should be given to checks aged 60+ days
  • Contact vendors to void and re-issue payments, as necessary
    • Ensure checks are voided via a bank portal
• Ensure lease and fixed asset population accuracy and completeness
• Record accrued property taxes and interest
• Review debt and determine short versus long term and prepare debt roll forward
• Record depreciation and amortization
• Prepare a month-end close calendar
  • This should highlight what role is responsible for completing the task and if the task is dependent on another activity
• Hold a pre-close meeting

Best Practice

The best practice for pre-close activities is to ensure that your people, process, and technology are all aligned. Documenting your close activities, business processes (highlighting the flow of information from initiation through reporting and its interaction with people and systems), and accounting policies (highlighting the complex transactions the company undertakes, the rationale for elections made, and how the calculations are made) are an excellent foundation for your accounting function. Well-designed policies and processes lead to improved controls, reduced workload, and better insight and transparency into your business.

A financial close optimization tool, such as Blackline, discussed in more detail throughout this article, is the best way to optimize your financial close process. BlackLine enables your accounting function to collaborate better by providing a cloud-based platform that connects your finance and accounting processes, data, and systems across the entire transaction lifecycle. Blackline provides your leadership team with a dashboard to monitor and manage, providing real-time visibility into status, timeliness, content, and quality from anywhere.

2. Perform Cut Off and Prepare Schedules

• Accounts Payable (AP)
  • Perform cut off
  • Search for unrecorded liabilities
  • Prepare and review aging
• Cash and Credit
  • Collect statements
  • Consider any deposits in transit and disbursements
• Accounts Receivable (AR)
  • Process all remaining invoicesMake bad debt determinations
  • Prepare and review AR aging
• Prepaids
  • Amortize expense
  • Review monthly additions and subtractions
    • Review contracts to ensure material amounts are recognized appropriately (straight line, percentage completion/milestone basis)
  • Determine current versus long term allocation
• Inventory
  • Review monthly additions and write-offs
  • Prepare Fixed Asset Listing
• Intangible Assets Roll Forward
• Deferred Revenue Roll Forward

Best Practice

Creating an accounts payable cutoff is the best first step to reducing your accounting function’s time to close. By standardizing the flow of AP invoices, using a custom AP inbox, and ensuring all available invoices are approved and processed by the last business day of the month, you can trim off valuable time during your month-end close process.

Another good best practice, which ties to the previous step, is standardizing the format of your schedules. Standardizing the formatting reduces the time to create, allows flexibility in who can perform the task, and decreases the likelihood of errors.

3. Post Closing Entries

• Revenue
  • Review and update revenue schedule
  • Post revenue entries
• Record all remaining accruals and deferrals
  • Record reversals
• Record any other “one off” entries

Best Practice

The best practices for your closing entries include verifying completeness (ensuring you’ve included the entirety of your business transactions for the period), reviewing and closing your sub-ledgers, if applicable, to ensure there are no transactions that are drafted but not executed, executed but awaiting approval and are failed, and automating where possible. In an ideal scenario, closing your sub-ledger will include automated push messaging for transactions that failed, are awaiting approval, or are pending.

Many journal entries are highly manual and require data inputs from a variety of sources. A data analytics platform, such as Alteryx, can be used to extract the necessary data from all its sources and blend and transform it into its required format.

Using a financial close optimization tool, such as Blackline, can create an automated and centralized process for your closing journal entries. With BlackLine’s Journal Entry solution, you can connect your ERP with a cloud-based platform that manages journal entries for you. This solution lets you set up rules and workflows to customize how journal entries are created, checked, reviewed, and posted. It also automatically certifies entries that meet certain criteria, so you can save time and concentrate on more complex journal analysis.

4. Prepare Reconciliations and Intercompany

• Bank and Credit/Charge Accounts
• AP and AR Aging
• Prepaids, Fixed Assets, WIP, Accruals, and Deferred Revenue
• Inventory
• Prepare Intercompany

Best Practice

The simplest best practice for closing reconciliations is to prepare true reconciliations rather than general ledger roll forwards. A reconciliation should be a comparison of your numbers and a detailed breakdown of the basis for any differences between the two. A roll forward, sometimes referred to as a “carry forward reconciliation,” is simply a listing of the activity in the general ledger and is far less valuable.

To move your financial close process along the maturity scale from passable to optimal, a solution like Blackline is necessary. Blackline can automate up to 98% of your reconciliations while reducing the number of employees needed in the reconciliation process by 55%. You can avoid the pitfalls and time-consuming process of manual spreadsheets with BlackLine’s Account Reconciliations. This solution ensures segregation of duties, creates read-only copies after certification, imports data automatically, and gives you full visibility into your accounting processes.

As discussed earlier, Alteryx is a data analytics automation platform that assists in collecting, preparing, and blending data. Alteryx is an excellent solution for organizations with a cumbersome intercompany process, as it uses rule-based logic to launch a series of tasks without intervention. Once a model is tailored, it will transform the raw data into the visual necessary to find the solution, and only small changes or adjustments are needed once the workflow is completed. Through the use of Alteryx, we’ve been able to reduce the time to reconcile the intercompany by 95%.

5. Financial Statements and Review

• Prepare Financial Statements
• Variance Report
• Budget to Actual Comparison

Best Practice

The review step is an integral part of the month-end close process. As stated in Step One, communication is key during the close process. Postmortem meetings, to review what went well or poorly, understand why, and receive feedback on how things could be done better moving forward, are an excellent way to increase collaboration and buy-in from your team.

An easy best practice would be to create a variance threshold (i.e., variances over X% or $X are automatically flagged) requiring an explanation of the variance. While preparing or reviewing a variance report, a best practice is asking “why” five times. By asking yourself why each time you uncover a new layer of a variance or difference, you should be able to understand the root cause of the variance and deviation.

Another best practice would be to use a data visualization tool, such as Tableau, to create customizable dashboards and reporting packages. These visuals can provide valuable insight into an array of topics and help elicit conversation within your organization.

How Centri Can Help

By following this month-end close checklist and best practices, you can streamline your month-end close process, reducing your time to close and gaining more insights into your business performance. Centri’s Accounting Transformation Practice is focused on solutions for foundational accounting needs, optimized processes, and advanced digital controllership designed to increase productivity, reduce costs, and improve the quality of reporting. Contact us to learn how our accounting transformation experts can help your business succeed.