January 25, 2021

How to Optimize the Month-End Close Process (with Flowchart)

How to Optimize the Month-End Close Process (with Flowchart) Image | BlackLine Magazine

What is the Month-End Close Process?

Before we explore leading practices for optimization, let’s start by defining the month-end close process. Terms and phrases like “record-to-report,” “accounting-to-reporting,” and many others are used interchangeably to reference the series of activities accounting teams must monitor, perform, and review, on a recurring basis, to produce timely, accurate, and complete financial statements and related reporting.

The figure below provides a visual overview of the process and key activities.

The figure below provides a visual overview of the process and key activities Image | BlackLine Magazine

What Are Month-End Procedures?

While traditionally a lot of the heavy lifting is done during a few peak days, the month-end close process is ongoing throughout the month as transactions are recorded in various systems.

Before reporting, Accounting must capture, review, and make adjustments to data from these disparate sources, which often include a primary ERP, other ERPs, sub-ledgers, banks, point-of-sale systems, and many others. When results are solidified and reviewed, accounting then reports results to stakeholders including internal management, external shareholders, regulatory bodies, and others.

But when accountants think about the month-end close, they’re likely referring to the activities in the middle of the figure above, like substantiating balance sheet accounts, reconciling transactions, recording recurring journal entries, analyzing variances, monitoring critical tasks and controls, and supporting audits are the ones that require the most effort. These activities are traditionally performed manually in spreadsheets and stored in difficult to access emails or on shared drives.

Now that we’ve defined the month-end close process and the procedures that comprise it, let’s consider the challenges the month-end close typically presents for accounting organizations—the likely reason why nearly 70% of CAOs recognize a need to change.

The month-end close process relies on a myriad of people, technology, processes, and many other inputs. As a result, accounting organizations are challenged by inconsistent data and processes and a lack of standardization across the enterprise—all while depending on spreadsheets, emails, phone calls, and historically in-person meetings to bring it all together.

As business leaders look for Accounting to provide more real-time insights, and while regulatory environments are increasingly complex, it becomes even more difficult for Accounting to do it all on time without compromising compliance or control. Traditional manual accounting processes are simply not sustainable.

How Financial Close Automation Technology Improves the Closing Process

In order to optimize the month-end close process, companies should embrace technology and innovation that enables transformation. Integrated solutions that address more than one aspect of the close process, and in particular, cloud solutions, are helping companies make the move to modern accounting—bit by bit. Let’s take a closer look at how automation technology improves the financial close process.

While there’s no one size fits all approach, many successful accounting organizations begin their optimization journey with close management by unifying data and processes and driving better accountability through visibility.  Technology can be used to capture all tasks and embed workflow and segregation of duties. Leading solutions also help centralize supporting documents and provide dashboards for reporting on status and KPI’s.

Optimizing balance sheet substantiation and high-volume reconciliation processes is a natural next step, as preparing, reviewing, and retaining account reconciliations is a common pain point for Accounting, and valuable resources spend a disproportionate amount of time on repetitive tasks like ticking and tying.

Technology not only standardizes account reconciliations using templates but improves continuity by embedding policies and procedures, reduces risk by importing general ledger account balances and other data directly from source systems, and drives efficiency by automating matching activities and up to 80% of certifications.

Another way to optimize the financial close is by addressing the journal entry process.

Many organizations record hundreds, if not thousands of journal entries each month. Technology not only centralizes the journal entry process with workflow and integration to related balance sheet reconciliations but automates the creation, posting, and certification of a significant portion of a company’s entries. Harmonizing the process and supporting documentation in the cloud not only saves time during the close but also reduces audit testing and preparation.

Finally, intercompany accounting and governance is another area ripe for transformation, as it poses numerous challenges for Accounting with complex regulatory requirements and cross-functional dependencies involving legal, tax, and other stakeholders.

Accounting can use technology to proactively govern their intercompany process from transaction initiation through netting and settlement. End-to-end intercompany solutions facilitate the process with defined workflows, embedded controls, and automation.

How BlackLine Streamlines the Month-End Close

The BlackLine Accounting Cloud is a leading accounting software platform and has helped thousands of accounting teams make the move to modern accounting. BlackLine solutions unify systems, data, and processes to unlock global visibility, automate repetitive work to focus on what matters most to the business, and deliver continuous real-time information and analysis.

Most importantly, BlackLine enables modern accounting to be achievable.

BlackLine’s cloud solutions address the areas of financial close management, accounting automation, and intercompany governance and can be deployed rapidly, allowing accounting teams to shift their focus to new challenges, provide consistency and control, and work together from anywhere.

It’s time to move to modern accounting. Read this white paper to learn how to fast-track your financial close efficiency and balance sheet integrity.   

Molly Boyle
Director of Solutions Marketing

Modern Accounting