Closing your books can be a strenuous task. Even though the authority requires businesses to present the financial statements annually, organizations may choose to do it every month to review the financial performance.
At the close of every month, the accounting workforce prepares itself to fight it out in the middle–looking for ways to sum up the month financially and performing a host of activities that they do every few days.
A month-end closing process can be grueling and cumbersome, but it is an integral part of your business’ success. It is imperative to understand that it is not a one-off process and cannot result from a day of hard work.
If you want to excel at it, you will have to be incessant about your processes and ensure that you do them well every single day of the year.
This article discusses steps to ensure a successful monthly closing process in Singapore.
What is a month-end close process?
Even though every single working day is vital for accountants, it is the month-end that matters more. The month-end close process refers to a series of steps to review, record, and reconcile account information to ensure the accuracy and completeness at the end of each month.
Most businesses give themselves a timeline of up to seven days of the subsequent month to close the previous month’s accounts. It means entering and freezing the data for the month and making sure it is reflected on reports of the correct period.
Importance of month-end closing process
If we leave something for too long, we often find it difficult to gather it afterward. The accounting world suffers from the same issue, too. If accountants fail to keep a particular month under control, it becomes a vicious cycle and can hamper business in more ways than one.
So it is imperative for accountants not to let laziness seep in and update the company accounts regularly.
It not only helps in keeping things accurate, but it also helps them figure out discrepancies quicker. Plus, these monthly figures enable them to compare and ascertain if the organization is improving.
Another reason to follow the month-end closing process is to keep a tab on dishonest employees. We have seen several businesses in Singapore closing down because of the lack of transparency and failing to recognize crucial elements for their organization.
When you are reconciling your income and expenses every month-end, it becomes easier to reconcile annual accounts. It allows the accounting team to focus on other issues rather than looking for the missing figures in the company’s books.
Steps to ensure a positive monthly closing process
Even though it can seem like a cumbersome task at first, it becomes a habit once you get used to maintaining the month-end closing process. Given the benefits on offer, the faster you get accustomed to it, the better it is for the business.
Here are the steps to ensure a positive monthly closing process in Singapore –
Be regular in recording daily financial transactions
The primary goal of the month-end closing process is to ensure timely and accurate financial statements. But to suffice with the bigger plan, a business has to pay attention to the narrower objective-to record any commercial activity as and when it happens.
It needs to be understood that the responsibility of the same doesn’t restrict to the accounting department alone. All the departments need to understand that they will have to be proactive and ensure that their organization achieves the ultimate objective.
Reconcile accounting system modules periodically
Most accounting firms in Singapore today employ integrated modules for a variety of purposes. A crucial part of the monthly closing process is to review the accuracy and the performance of these system modules.
For example, a retail business will have a PoS (Point-of-Sale) integration. It lets them capture daily sales and feed them into the system. You can occasionally enter dummy data at the end of the month and verify its efficiency.
Use a standardized format
If higher management can set a standard format for transactions, activities, and reconciliations, the accounting workforce will have a higher clarity about their work scope. It also helps them in creating their to-do lists with higher conviction.
But if the business uses a standardized format, the management must convey it to the other departments. That way, all the data received by the accounts department would be easier to inculcate in the books. It will also help all the departments to be more accurate with their reporting.
Give attention to journals
Journals are a vital part of bookkeeping. This is part of the steps for finalising your financial statements. The more accurate your journals are, the easier it would be for you to close your month-end processes.
It is advisable to record transactions in the journal as and when they take place. It would not only help you track your processes better, but it would also help you in managing your inventory.
Set achievable expectations
We understand that the management wants to streamline the bookkeeping process. However, it is imperative for the higher authorities to remember that the accounting team comprises humans, and they have limits.
Even if they sometimes set unrealistic expectations, the accounting workforce must convey about the same to them. It will prevent any confusion from seeping into the process.
Let your employees take the responsibility
Even though higher management will try their best to establish a successful monthly closing process, it won’t have the desired success if employees fail to imbibe it. So it becomes imperative for you to pass the baton to them from the very onset.
It will also make them feel like they belong to the organization and motivate them to contribute to the cause. Many organizations push team members to take responsibility and let them showcase their abilities.
Work as a team
Football is a team game, and so is the process compliance for an organization. We cannot point out a single person in the accounting or any other department and bestow him or her to manage the month-end closing processes.
Instead, brands have to curate flexible teams capable of performing multiple roles and adapt in real-time. It would allow each of the members to identify shortcomings and figure out the solutions.
Harp on cross-training
In a traditional scenario, a company only employs a cashier for managing the physical cash account. If he gets seriously ill and cannot attend office for two weeks, it often hampers reconciliation processes.
Modern-day businesses are different. They harp on cross-training to ensure that the absence of personnel doesn’t affect the overall process. When your team has versatile individuals, it also provides flexibility in the typical working environment. It makes them better prepared to handle tough times.
Automate wherever feasible
A significant chunk of the accounting work is repetitive. For example – we pay rent for the business space, charge depreciation on assets, and receive a fixed interest on our fixed deposits.
Instead of letting the accounts team do it manually, you can automate such entries. It would cut down on time, and other resources incurred by the management and enable the employees to focus on other tasks.
Reconcile balance sheet figures
One of the easiest ways to figure out mistakes or missing data is to reconcile balance sheet figures. We recommend starting with cash since it forms a part of most transactions. If your accounting team is in the habit of reconciling cash daily or weekly, the process would be smoother for month-end activities.
Once you have sorted cash, the next step is to make all the adjustments and move on to the rest of the figures.
Conduct management review
Before closing the month-end processes, it is imperative for you to conduct a management review. Here, the higher management receives the financial statements along with the relevant documents for review purposes.
The process is critical as it gives an outside review of the prepared statements. It allows eliminating any bias and rectifying any issues with the month-end accounts.
Have a plan of action for the upcoming month
Organizations that succeed are proactive and not reactive. They plan ahead of time and execute timely. If you plan to be the same, start creating a monthly financial calendar. It will help you close your books and also ensure that you do not have to suffer from unnecessary hindrances in the way.
The plan of action will include a timeline for recording transactions, reporting, reviewing, and other activities. Finalizing a closing date for all your expenses and income would bode well for your endeavors, and the higher management must communicate it to the entire workforce.
If the accounting team closes the monthly accounts timely, it bodes well for the business in more ways than one. It lets the requisite personnel draw critical insights in real-time and use them to make decisions. It also helps keep up the accuracy quotient and informs the employees what the higher management expects from them.
With automation seeping in and making a significant impact on the accounting side of things, reconciling and following a successful monthly closing process has become much more convenient. It has also allowed the workforce to devote more time to more critical business processes.