Financial close management is more than closing books and reconciling numbers. An effective financial close process involves ensuring granular data availability, a connected workspace, an integrated journal entry model, and more.
Financial closing period – the term must have rang a bell as soon as you heard it. It is that time of the year when you close all your financial books, validate your financial statements, reconcile accounts, and ensure all your financial reports are accurate and comply with all the GAAP (Generally Accepted Accounting Principles). However, the process is not as simple as it seems, especially for a growing business yet to streamline processes. Why? Let’s find out.
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Reduce Repetitive Manual Tasks
Most parts of the financial close management are done manually, from posting journal entries to reconciling general ledgers, preparing income statements or balance sheets, etc. With smaller teams juggling between critical tasks like financial close and other vital tasks, the lack of attention and extreme rush often leads to errors and inconsistencies, making reconciling accounts a complex task.
Additionally, most legacy financial close software doesn’t have any out-of-the-box integrations other than ERPs. Despite a part of the process being automated, your team still has to export data from 3rd party systems as CSVs and upload them to Excel to perform analysis.
Implementing general or sub-general ledger integrations in your financial closing software can help you integrate with not only source systems like ERP but also other third-party systems to extract general ledger and sub-ledger data. Also, you can create pre-built connectors for common ERPs to automate the general ledger entry posting.
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Having Proper Month-End Close Checklist
Having a month-end close checklist is one of the most important tasks. It ensures a systematic and thorough approach to financial closing, reducing the risk of errors and inconsistencies. However, businesses rarely have a proper month-end close checklist, leading to overlooked numbers, undetected anomalies and omissions in financial statements, and a lack of clear audit trails.
The only solution here is to make sure your month-end close software offers you a pre-built library of close checklists and pre-configured task templates that you can organize by general ledger account type so you can pick a template and customize it based on your needs.
For instance, an accountant can use a template for travel expense journal entries that would pre-populate with the appropriate data from the ERP or third-party systems, modify it to add fields for lookups and calculations and finish the task by preparing the journal entries.
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Make Granular Data Highly Available
Accurate financial reporting depends on the availability of accurate and nuanced data. However, due to disparate cloud financial close solutions and siloed data in ERPs and spreadsheets, finance and accounting teams have a hard time gathering, streamlining, verifying, and applying the right data in the right place.
In addition, most of the financial close tasks need accountants to provide supporting evidence to auditors to ensure accuracy, which is often difficult to find when you don’t have a single source of truth.
The only way to streamline this process is to implement flexible data extractors and ERP connectors in your financial close management software. These features will help bring in summary and transactional line item level data from the general ledger and other sub-ledger systems like accounts receivable, fixed assets, and accounts payable. In addition, you will also have capabilities to extract transactional and master data details from invoices, purchase order history, and SKU details.
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Fostering A Connected Workspace
The process of financial close is often rushed. Accounting teams need to collect data from all disparate sources at once, compile them, reconcile them with different journal entries and general ledger accounts, and then prepare the financial statements, so they can be further used by auditors to prepare annual reports. But when the data is stored in hard-to-access systems, teams have to do it manually, leading to more time, anomalies, and errors in financial close processes.
Make sure that your financial close management software offers a connected workspace with collaborative tools, combining the intuitiveness of a spreadsheet with the rigor of a database. It should also provide easily configurable task template links for the task workbook and the ERP data through the elements of the data catalog, such as connections, data jobs, and datasets. Also, see if your financial close software could also provide filters for attributes like legal entity, year, period, etc., that could be applied to your data to create a dataset for general ledger line items.
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Ensure consistent journal entry
Journal entry is one of the main pillars of financial close management. However, this critical yet manual task faces numerous bottlenecks, like errors in posting, a non-standardized approach to considering expenses, mistakes when posting from journal entries to general ledgers, chances of double entries, etc. To ensure that the journal entry process is efficient, organizations need a cloud financial close solution that can create an automated journal entry creation process and offers out-of-the-box close and reconciliation management.
Additionally, your financial close management software can also have fully integrated features for journal entry write-back and templates that you can configure to any ERP that contains the same level of validation.
Streamline Your Financial Close Management With Financial Close Software
Getting out-of-the-box features for the above capabilities is no cakewalk. These third-party integrations are not only fragile but also incur high costs and require heavy maintenance and too much reliance on the IT department. The right financial close software offers over 100 pre-configured close checklists and task templates to help you with quicker implementation of the solution. Moreover, your accounts and finance team can leverage Excel-like, easy-to-use templates for low-priority use cases, populate with the results, and attach them to financial close tasks. Additionally, with the automation of these robust financial close software, you reduce days to close by almost 30% and increase efficiency up to 40%.