What is the month-end close process? And how can you streamline it?

The monthly close is a necessary evil for many accountants: an arduous process with long hours, painstaking scrutiny of numbers, and a rush to meet tight deadlines.

From reconciling revenue and expense accounts to ensuring compliance with internal policies and external regulations, it’s a recurring ritual with pressure to deliver accurate results under a tight deadline. And often, just as one close wraps up, it’s time to start another.

Ultimately, however, the month-end close delivers benefits beyond balanced books, as it unveils insights into the health of all transactions, the company’s finances and incoming cash, identifies opportunities for cost control, and shapes strategic decision-making.

Building efficient processes for every transaction throughout the month can ease the pain of the close. Let’s look at the month-end closing process and explore some ways to make it less painful.

What is the month-end close process?

The monthly close process is a crucial accounting procedure that happens at the end of each accounting period, typically at the end of the month.

In simple terms, the month-end close involves reconciling accounts, verifying transactions, and preparing financial statements to accurately show the company’s financial status at the end of the month. To do this, the finance and accounting team reviews and adjusts journal entries, reconciles bank statements and accounts, analyzes variances, and ensures compliance with regulatory requirements.

The month-end close is no small undertaking — our research shows that 61% of organizations spend at least a week on their close. However, another survey found that only 20% of respondents felt good about their close process.

The month-end closing process: How does it work?

Here’s a simple outline of the month-end closing process:

1. Record monthly expenses and income.

Start by accurately compiling your account statements and recording all expenses and income for the month. Organize your monthly financial statements and data to ensure nothing slips through the cracks.

2. Update accounts receivables and accounts payables.

Keep your records up to date by reconciling accounts receivables and payables. This helps maintain accurate cash flow projections and ensures timely payments and collections.

3. Reconcile accounts.

Take the time to reconcile bank and credit card accounts. Matching savings accounts and transactions ensures accuracy and identifies any discrepancies that need to be addressed.

4. Review inventory data.

Review inventory data to reconcile physical stock with recorded quantities if your business deals with inventory. This step helps prevent stockouts or overstocking.

5. Reconcile accrued or pre-paid accounts.

Verify the accuracy of accrued expenses or pre-paid expenses and accounts payable balance above. Adjustments may be necessary to reflect the correct financial position.

6. Prepare fiscal statements.

Generate financial statements such as income statements, balance sheets, and cash flow statements. These statements provide a comprehensive snapshot of your company’s financial health.

7. Review and finalize financial statements.

Thoroughly review financial statements for accuracy and completeness. Address any discrepancies or irregularities before finalizing the month-end close.

How to streamline the month-end closing process.

Automating the capture and organization of data in real time reduces manual errors and speeds up reconciliation tasks. The result is a faster, more efficient close.

However, for decades, many businesses struggled with legacy accounts payable (AP) platforms that lacked the capabilities for real-time data collection and visibility. These outdated systems often relied on manual data entry and batch processing, leading to delays, inaccuracies, and inefficiencies in the close process.

As a result, the finance and accounting teams faced challenges in obtaining timely insights into their financial performance and ensuring the integrity of their financial records.

All that has changed with the introduction of platforms like Airbase.

The Airbase difference.

Airbase streamlines the month-end closing process by providing automated workflows and features that simplify tasks such as reconciling accounts. Assisted reconciliation cuts hours off the reconciliation process alone.

Airbase’s automated GL sync ensures that transactions are updated automatically as they happen, and supported documents are automatically uploaded for a comprehensive audit trail.

Airbase’s customizable approval workflows and policy enforcement capabilities help ensure compliance with a company’s financial data and policies, reducing the risk of errors and discrepancies that must be addressed during the close.

Our customers’ experiences.

Airbase customers tell us they’ve cut as much as 10 days off their month-end close, often cutting the time-to-close in half.

One G2 reviewer summed it up nicely:

“Airbase is probably the only company that understands the pain and importance of the monthly closing process.”

The importance of the month-end closing process.

The closing process serves many important purposes:

• It ensures the accuracy and integrity of financial records by reconciling accounts and verifying transactions. This accuracy is essential for regulatory compliance and provides stakeholders with confidence in the company’s financial statements.
• It gives valuable insights into the company’s financial health and performance. By reviewing financial statements and analyzing trends, organizations can spot areas for improvement, head off potential risks, make informed decisions, and plan for the future.
• It leads to the smooth operation of other financial activities, such as budgeting, forecasting, and auditing.
• It serves as a crucial checkpoint to ensure the accuracy, integrity, and completeness of financial records.
• It’s essential for regulatory compliance, ensuring adherence to accounting standards and regulatory compliance. This is essential for public companies.
• It instills confidence among investors, creditors, and other stakeholders, fostering trust and credibility in the organization’s financial statements.

Make your next close faster.

Often time-consuming and sometimes frustrating, the monthly close is a vital checkpoint for identifying trends, analyzing performance, and strategizing for the future.

The month-end process is a critical aspect of financial management, providing businesses with accurate insights into their financial health and facilitating informed decision-making.

Airbase can play a pivotal role in streamlining the month-end close process, offering innovative solutions that automate tedious tasks, enhance data accuracy, and improve efficiency.

Through real-time syncing between spending and the general ledger, Airbase enables continuous updates, reducing manual errors and saving valuable time for the accounting department.

Its user-friendly interface and customizable workflows empower employees to navigate procurement processes seamlessly while maintaining compliance with company policies and regulatory requirements.

With Airbase, businesses’ finance and accounting departments can transform the month-end close from a laborious chore into a streamlined, insightful, and value-adding practice, ultimately driving greater financial agility and success. See it in action for yourself!