How to close the books faster?
Closing books is one of the most demanding tasks at the end of every year.
The process involves rechecking all the data entries of income, expenditure, profits, and losses during the financial year. The data is then analyzed to prepare the financial statements of the company.
This process might sound simple, but it takes a lot of time and effort to ensure every receipt matches its entry.
If there is any double credit or debit, it has to be reversed in time before submitting it for further assessment.
Because companies still rely on manual accounting practices, making the task challenging. Employees have to flip through every sheet and file individually to ensure no discrepancies occur in entries.
For this reason, employees start preparing a long time before seeing they file everything in time. They still fail to submit. To make this task less cumbersome and more efficiency-bound, companies can adopt accounting automation.
The cloud-based software enables companies to reduce month-end close time, ensure every record is considered, and file an error-free financial report.
Why does company need to close its accounting books?
Closing the books in accounting gives you insights into a company's performance in the ongoing financial year. They try to comprehend how judiciously the company’s resources were utilized to generate revenue and increase the annual turnover.
What more do companies gain from month-end closing books?
1. Updating books of accounts
Through the month-end closing book technique, companies can easily account for missed data entries, check for duplicate transactions, and try to undo them before the final assessment.
Because the errors and omissions are identified at an early stage, companies can establish internal controls and try their best to avoid them in the future.
2. Monthly reconciliation
Having reconciliation on a regular basis helps in keeping the finances in order.
The accounts team understands how punctual creditors are in paying the money lent to them and how the company pays its vendors.
The monthly reconciliation also helps understand which invoices were born and are yet to be paid.
Also, if there is any payment discrepancy, it can be immediately attended to instead of acknowledging it at year-end.
3. Monthly financial performance
Due to the month-end closing reports, the management understands the cash flow patterns of the company.
Based on these patterns and future predictions, they can plan financial strategies for the upcoming month or quarter.
Moreover, the management gets to know the monthly spending habits, which helps revise budgets accordingly.
4. Departmental performance evaluation
The management can infer how well the departments use the allotted budgets and resources to churn profit through the monthly closing of books.
If not, the management can make decisions for goal re-setting.
5. Management insights
The monthly reports help management to understand the performance capabilities of the company.
They can provide insights into how the company missed chances of earning a profit, how the product pricing affects the customer base, what trajectory in the future is predicted, and how employees have performed compared to the set standards.
How does integration speed up your month-end close process?
Accounting automation is the answer for your prolonged and scattered month-end close process.
A typical process of month-end close automation asks for generating and maintaining multiple worksheets.
Also, it involves tasks like submitting invoices, preparing a list of doubtful accounts and bad debts, charging depreciation and amortization for assets, estimating the inventory, and preparing reports.
Before drafting a final report, the values need to be rechecked against multiple ledgers. Spreadsheets and MS Excel are the most prominent tools for carrying out this process.
Undoubtedly, these tools have proved their usefulness from time to time, but accounting work requires more advanced functions that should make the methods more sophisticated.
Automations and accounting integrations do the remaining work for the accounts team. Employees can speed up the process through powerful accounting integrations and allow the timely closing of books.
Accounting system integration completes tasks in less time and offers a high level of precision. Employees are not required to revisit the entire financial data to close the books with a few effortless and straightforward clicks.
This way, employees can escape the repetitive tasks and focus on more productive areas. Shifting to an automated accounting system does not give companies overnight success.
Employees need to be made aware of the functionality and delicacies of the system, and if not operated systematically, it can cost companies vast amounts of money.
Thus, prior to adopting the plan, companies should decide on the right approach and strategies to reap the benefits of the software.
Why is closing books a challenging part of accounting?
Closing books poses challenges to each company, whether internal or external. Companies need to address them before they become a huge setback for them.
Below mentioned are some of the challenges faced by companies:
1. Accounting techniques
Every company has its own set of accounting practices.
While some follow a financial calendar, some abide by the fiscal year calendar; some companies use the accrual basis of accounting and some cash basis of accounting; on the other hand, companies close their books on a yearly basis while some reconcile it every month.
Therefore, it’s challenging to keep pace with each accounting practice. This causes a hindrance for those companies who reconcile on a monthly basis.
2. No significant changes
Consolidating books every month seems a vain effort, as, at any given month, no significant changes are recorded compared to quarterly and annual reconciliation.
Employees waste unnecessary resources and time in generating reports and filing books.
3. Supply chain process
The supply chain process is a stretched-out and repetitive process.
Reconciling every month may or may not consider the invoices, payments, and inventory currently being processed in the supply chain.
4. Not having paperless accounting
Companies that depend on paper and printing accounting techniques might find it hard to reconcile month-end close.
This accounting system arises from situations of missing entries, no scope of rectification of errors, and high inefficiencies.
Hence, even if employees manage to file records every month, their reliability will still be doubtful.
Get started with Volopay
Volopay’s powerful accounting integration software is the stand-alone tool for all your accounting needs.
You can make your bookkeeping process well organized and labor-saving.
Our accounting integrations with Xero, Netsuite, Deskera, and Quickbooks empower the financial framework and fosters you to close your books in time.
All the data entries and transactions seamlessly integrate into your accounting software, and data syncs in real-time.
What does Volopay offer you?
• Automatic integration into accounting software.
• Allows you to label transactions.
• Transparent display of synced and pending sync entries.
• A general ledger for every transaction.
• Unique ledgers for each expense category.
• Auto-categorization of expenses.
• Alerts for pending expense approvals.
• Reminders for upcoming payments.
• Bill Pay for domestic and international transfers.
• Automated virtual cards.
• Manage your budgets.
• A user-friendly interface.
FAQs
Yes, all the transactions made in Volopay’s accounting system will be updated in your ERP system.
As of now, No. Volopay allows accounting integrations only.
You can label transactions according to your convenience with custom auto-categorization to make transactions more identifiable.
NetSuite is used in various industries, from digital marketing, energy, and financial services, to IT services, nonprofits, and transportation & logistics.
You cannot select which transactions to show up in your books.