Audit Readiness
How do I close the books in Sage Intacct?
One of the biggest shocks to new staff accountants is the intense, all-hands-on-deck chaos of the month-end close. It’s a shock because accounting classes mention it only in passing — if they mention it at all. But the good news is that if your team applies a method to the madness, the month-end close can be a whole lot smoother.
How do you do a month-end close?
Closing the books is the process of verifying and adjusting month-end balances for the purpose of preparing reports that reflect the company’s true performance over a specific period of time. Financial accounting textbooks present the accounting period end close as a simple four-step process to transfer the balances in income statement accounts to equity on the balance sheet and zero them out for the next period:
- Close Income to a temporary Income Summary account.
- Close Expenses to that same temporary Income Summary account.
- Close the balance in Income Summary — which equals net income for that period — to Retained Earnings.
- Finally, close cash dividends paid to shareholders to Retained Earnings.
Most accounting software does this process invisibly, behind the scenes, so all you really see is the end result — a set of balanced financial statements, and the general ledger ready for the next accounting period.
But a lot of work has to happen first prior to those simple-sounding four steps. Before any of those accounts can be closed out, you have to make sure that all the transactions that should be recorded have been recorded, and that they’re recorded correctly. Bank reconciliations need to be completed. All of the external systems that feed into Intacct have to be synced and reconciled. Those external systems include things like your CRM, Bill.com, Zuora, and your expense management systems. And you have to set up all your journal entries to record accruals, reversals, and deferrals plus depreciation and amortization. Prepayments need to be allocated between the current period and the next periods.
Most accounting teams use some kind of closing checklist to make sure that all the tasks get completed in the correct order. Keeping that checklist in the head of the controller or CFO might work for a short while, but as your company grows, it rapidly devolves to chaos.
Developing, using and constantly optimizing an interactive month-end close checklist won’t solve all the problems of trying to get the work done faster and accurately, but it does help. So let’s dive in and run through the tasks that make up the month-end close in Intacct.
What is the month-end close process in Intacct?
As I mentioned above, there are a lot of things that need to happen before you can close the books each month. In working with CFOs and controllers in many types of companies, we’ve come up with a list of essential tasks. Depending on your company, some of these may not apply, or there may be some specialized tasks that aren’t listed. But this should get you well on the way towards building a collaborative checklist and the closing procedures that work for you and your team. This same general process applies whether you’re closing the books for the month or the fiscal year.
- Confirm all transactions for the period.
- Post or import payroll. Make sure all timesheets have been submitted and approved.
- Verify that all accounts payable bills are in the system, including recurring bills.
- Verify that all accounts receivable invoices are in the system, and that all recurring invoices have been generated.
- Verify that all expense reports have been submitted and approved.
- Post or import all credit and debit card charges.
- Post closing entries in the general journal
- Review and post revenue recognition from schedules.
- Post deferrals, accruals, and reversals.
- Post depreciation, amortization, and any other revenue or expenses from other modules.
- Verify that all entries that should have been entered actually were entered.
- Close sub-ledgers
- Check for any transactions that are in draft form, recurring transactions that have failed, and transactions still awaiting approval.
- Be aware that this will also close any co-dependent sub-ledgers such as Purchasing or Order Entry.
- Perform all reconciliations
- Reconcile all bank accounts to bank statements. High-volume accounts may be easier to manage with weekly or even daily reconciliation.
- Reconcile all charge accounts.
- Reconcile AP aging to sub-ledger and subledger to General Ledger.
- Reconcile AR aging sub-ledger and subledger to General Ledger.
- Reconcile Prepaids, Fixed Assets, Work in Progress, and any Deferred Revenue accounts.
- Run review reports
- P&L Variance or Budget vs. Actual.
- Investigate any unusual changes.
- Close the Books
- Under General Ledger > Books > Close.
Congratulations! You’re done! If this is a year-end close, it may take more time because you need to really make sure your numbers are tied down for your audit and tax return.
How long does a month end close take?
Obviously, the sooner you can close the books, the sooner you can get accurate reports to management, which gives them more time to make any needed changes. This also gives the accounting team more time to work on other projects. According to a survey by Sage, about two-thirds of small to mid-sized businesses close their books in 15 days or less. A best practice, which 26% of their survey respondents achieve, is to close in one week or less. Nine percent of their respondents manage to close in just one day.
This isn’t quite as fast as the latest results from Ventana Research, where researchers found that 61% of companies were closing the books within six days in 2019. Nearly half (46%) were closing in four days. The difference in timing may be because Ventana typically looks at companies with 1,000 or more employees.
How do you reopen the books in Intacct?
Sometimes, no matter how diligent everyone was about making sure the numbers really were final before the books closed, you need to make some changes to a closed period. The good news is that Sage Intacct understands the flexibility that accountants need from time to time.
To open the books in Intacct, go to General Ledger > All > Books > Open. Choose the Entity and the Period you want to open. In this window, you also have the option to open the sub-ledgers for AR, AP, Cash Management, Time & Expenses, or to leave them closed. Click on Open and the books will be open. Be sure to close the books again after you make your changes so no one else can inadvertently make changes to a closed period.
Close the books like a pro
Now that you’ve got the general month-end process down, you can start divvying up the tasks among your team members. Starting with a complete checklist can help you get started as you optimize your processes to speed up the close. Keeping in mind that many of these tasks must be completed sequentially, you may be able to speed up the close by completing some tasks in the current period, and not waiting until after the end of the period to get started. Remember, the sooner you get the books closed, the sooner you can do the cool stuff in accounting.
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