What is Close Management? A Beginner’s Guide to Efficient Financial Closes

Are you tired of spending long hours reviewing and closing the books during the month-end and year-end close? Do you wish there would be a better way to streamline and automate the closing process so you can always close the books with accurate accounting records? If so, you need nothing but perfect close management software.

By using cloud-based close management software, you can end the tedious manual tasks and optimize the year-end close process. Succinctly, close management software helps you streamline your month-end and year-end closing tasks and expedites your closing processes. Let's see how valuable it is if you are an accounting professional.

What is Close Management?

Close management is the practice of structuring and conducting a financial closing process in a systematic way that assures the quality and validity of financial records. It is quite frequently the case to have journal reviews, account reconciliations against balance sheet entries, closing income and expense accounts and ultimately obtaining a balanced and correct picture of the financial situation of your company. Effective close management is crucial for making informed decisions about your business objectives and financial health.

The Traditional Month-end Close Process

The conventional month-end close process relies heavily on manual processes. Accounting teams often find themselves working late nights to finalize balance sheets and reconcile bank accounts. Data is pulled from disparate systems, creating a complicated workflow where human error becomes inevitable. Manually reconciling incoming cash, invoice payments, and fixed assets can delay financial reporting, ultimately impacting the company’s financial management capabilities.

The Challenges of Traditional Close Management

1. Manual Data Entry and Human Error

Manual processes create opportunities for mistakes, which can be detrimental to financial health. Inaccurate journal entries or inconsistencies in balance sheet accounts can adversely affect a company’s financial position resulting in poor decision-making.

2. Lack of Automation and Real-Time Data

Accounting departments using traditional closing techniques have to assess large quantities of financial records and reconcile each transaction manually. The manual process makes repetitive tasks in accounting procedures a laborious task, usually completed at the end of the accounting period. The long hours cause delays that limit access to real-time data, presenting a negative impact on financial performance and the flexibility of financial management.

3. Time-Consuming Reconciliations

Reconciling bank accounts, verifying fixed assets, and analyzing credit policies require an extensive amount of time. Accounting professionals are often overloaded, and the high number of transactions presents a risk of burnout and decreased work performance.

4. Disparate Systems and Inconsistent Records

Most companies employ disparate systems for various financial functions, including expense management, corporate tax, and sales processes. When systems do not communicate, it becomes difficult to produce comprehensive financial statements. As a result, finance teams spend a lot of time integrating and verifying data from different sources.

How Close Management Software Can Help

The need for efficiency and accuracy has driven the rise of close management software. Automation software can revolutionize the financial closing process by streamlining key tasks and providing real-time data.

Benefits of Using Close Management Software

1. Close Books Faster and More Accurately

• Traditional approaches to financial book closure typically trade off speed and accuracy. However, with automation software, you no longer need to sacrifice one for the other.
• With an accurate close management tool at your disposal, your month-end close can be completed on average 80% quicker with minimized errors. This is done through the automation of tasks such as journal entries and invoice payments and by breaking down the activities and more complex procedures into smaller parts.
• Automation software enables accounting personnel to work at real-time, and all balance sheet accounts and bank accounts can be reconciled accurately.

There is often a compromise between speed and accuracy when using the conventional method of financial reporting. A top-notch close management tool, however, can assist you in achieving both goals.  You can close your books 80% faster with improved accuracy. It is possible because the close management software allows you to break the tasks into smaller sub-tasks and lets you work collaboratively and systematically.

2. Reduce Manual Processes and Human Error

• With manual processes, there is a chance for human error, resulting in distortions in financial records. By implementing automation, you minimize the risk of mistakes.
• By automating, your accounting department can depend on a smooth chart of accounts, so your balance sheet account reconciliations and fixed asset tracking can be free from errors.

3. Enhance Team Collaboration

• Close management tools provide a centralized platform where accounting teams can collaborate effortlessly, even if they use disparate systems.
• Collaborative work promotes transparency and guarantees that financial statements, such as balance sheets and income statement results, are accurate, and up-to-date.
• Tasks that generally require a lot of time and manual effort (e.g., managing expense accounts, handling incoming cash) can be done effortlessly.

4. Focus on Strategic Work and Continuous Improvement

• The use of efficient close management software saves time for strategic planning, periodic credit policy reviews, and project plans that support your business objectives.
• Regular accounting processes keep your accounting team busy with data analysis, rather than just data recording. This enables better monitoring of the financial health of your company and its flexibility to adapt to new financial processes with agility.
• Completing the closing tasks swiftly also allows you time to invest in professional development, meaning junior members of the accounting department can grow professionally.

5. Make Informed Decisions with Real-Time Data

• Close management software keeps you updated with real-time data, allowing you to make informed financial decisions immediately that result in positive business outcomes.
• The reporting module with the most reliable automation software can provide insights into transaction volumes, financial position, corporate tax reporting, and accrual accounting practices.

Key Steps in the Financial Closing Process

1. Review Journal Entries: The verification and accurate recording of all journal entries is one of the first steps of the closing process. This includes everything from the process of recording incoming cash and finalizing the expense accounts. Errors at this stage can affect the entire financial reporting process, so accuracy is crucial.

2. Reconcile Bank Accounts and Balance Sheets: Reconciling bank statements and checking balance sheet accounts are key processes. They guarantee that the financial position of your company is correctly reflected, so you can see clearly how many assets and liabilities you own, and how much equity you have.

3. Track and Update Fixed Assets: For companies with property, accurate records of asset depreciation and valuation are essential. Such updates may affect the balance Sheet and, consequently, the financial health of the company.

4. Process Invoice Payments and Manage Accrual Accounting: Reviewing unpaid invoices and handling accruals guarantees that your financial statements capture all obligations and income, even if payments have not yet been made or received.

5. Prepare Financial Statements: The primary aim of the close process is to generate financial statements that accurately capture your business’s financial position. These include balance sheets, income statements, and cash flow statements, which play a central role in data-driven decision-making and planning to achieve future business goals.

Key Features to Look for in Close Management Software

1. Automation and Real-Time Updates

Select software with built-in automation features and real-time updates to streamline your month-end close process. Automation eliminates manual processes and human errors, providing your finance teams with updated balance sheet accounts, bank accounts, and accrual accounting data. This guarantees that your financial records are correct and available for timely financial reporting, which helps you make informed data-driven decisions.

2. Seamless Integration with Existing Systems

A powerful close management solution should seamlessly integrate with your accounting software and the different accounting department’s systems. This seamless integration combines financial data effectively and guarantees that the accounting staff can deal with the workflows smoothly. It also links all financial processes, from the audit of journal entries to managing expense accounts and chart of accounts.

3. Customizable Reporting Modules

The ability to report in a flexible and adaptable way is important for financial health management in a company. The ability to report in a flexible and adaptable way is important for financial health management in a company. A robust reporting module allows your finance teams to generate comprehensive financial reports, assess transaction volumes, and support corporate tax reporting. These tailored reports provide visibility into your financial position, allowing for strategic financial management and aligning with your business objectives.

4. Task Management and Workflow Automation

Effective task management capabilities are critical for planning accounting tasks and maintaining accountability. Identify programs that automate routine processes, then delegate tasks to individuals on the accounting team, and alert them to deadlines. This contributes to streamlining the month-end close and reduces the risk of unaddressed duties.

5. Bank Account Reconciliation Tools

Your software should include powerful bank account reconciliation features to help streamline the process of matching transactions and verification of balance sheet accounts. Automated reconciliation facilitates early detection of errors, thus, avoiding lags and increasing the accuracy of financial records.

6. Support for Continuous Accounting Process

 Close management software that supports a continuous accounting process allows your accounting teams to maintain accurate records throughout the accounting period. By automating routine tasks and providing real-time financial data, this feature ensures that financial statements are always up-to-date, enhancing your company’s ability to meet its financial objectives.

7. Invoice and Payment Processing Automation

Efficient close management software should automate invoice payments and cash flow tracking, streamlining the sales process and ensuring that incoming cash is properly accounted for. This feature helps maintain accurate expense reports and provides a clear view of your company’s financial position.

Choose the best solution in the market

At this point, you likely have a solid understanding of what close management software is and how it can be an effective tool for streamlining and accelerating your closing process. Why wait when you can have, a priceless solution?

To reap these benefits, choosing the right automation software is essential. Look for a tool that integrates seamlessly with your current systems, provides a comprehensive chart of accounts, and offers features tailored to your company’s needs, such as support for accrual accounting and corporate tax reporting.

Leading accounting firms use Xenett to improve their close processes, which enables them to review and close the process faster than earlier. The fact that Xenett was created by accountants, for accountants, and with every accountant's needs in mind, makes it unique. You can right away to learn more about Xenett. Book a demo call

How Xenett Stands Out in Close Management

Here’s what makes Xenett exceptional:

• Built for Accountants by Accountants: Xenett was created with the specific needs of accountants in mind. This means every feature is designed to address common challenges, from reviewing journal entries to reconciling bank and savings accounts.
• Optimizes the Month-End Close Process: Xenett's platform can streamline your month-end close process, helping you save hours of work and improve the accuracy of your financial records.
• Automates Tedious Accounting Tasks: Whether it’s reconciling fixed assets, managing disparate systems, or finalizing the chart of accounts, Xenett automates these processes for you.
• Facilitates Financial Management: With Xenett, your accounting staff can focus on strategic financial management rather than tedious administrative tasks. The software supports a continuous accounting process, ensuring your financial statements are always ready for review.

Final Thoughts

By now, you understand that close management is a crucial part of financial processes. You can achieve important benefits by streamlining your month-end close with the right software. It is a guarantee that you will improve the accuracy of your financial statements and encourage your finance team and accounting department to implement strategic initiatives that facilitate business growth and success.

So why struggle with traditional manual methods when you can improve your financial closing process with the best close management solution in the market? Leading and successful organizations have already installed Xenett to improve and accelerate their close processes while reducing manual labor.

Do not miss the opportunity to streamline your accounting processes and improve your business’s financial management. Book a demo with Xenett today and enjoy a more efficient, accurate, and collaborative closing process.