Achieving a painless and faster close is every finance department´s dream. However, one of the devils of a financial close for many organizations is the manual journal entry.
Having a few manual journal entries is not a problem at all. However, when there is a significant number of manual journal entries made it can extend the closing period. From experience, this also usually signals several problems with the financial close process because it can hide systemic problems.
It is perhaps a good idea to look at how many manual journal entries your organization makes because this might call for a revision of standards and optimization of your accounting processes.
Below are 5 best practices that might help your organization.
- Minimize disparate systems
Integrate your ERP, CRM, and other legacy systems as much as possible. Having integrated billing and revenue recognition for example from your CRM system can immediately populate dimensions to orders that can automate your journal entries to some extent.
- Clearly define and document your accounting policies
Many organizations struggle with the lack of defined and documented policies so this is a good step to take. For many, there are ad hoc policies but auditors will always want a coordinated set of policies that guide everyone in the company. This is especially important for complex issues around commissions, amortizations, billing, etc.
- Gather external feedback
Your auditors or consultants can be excellent sources of feedback. Review your accounting processes with them especially around revenue recognition rules. Agree with them before they audit, group your transactions and your documented policies. This will help expedite the entire process.
- Standardize and formalize your financial process
The truth is no one can ever eliminate manual journal entries. That´s the truth. However, you can minimize the number of manual journal entries by standardizing and streamlining your financial process. Budgeting and Planning software or Financial Reporting software like Performance Canvas Financials offers a unified platform for optimizing the entire process and then automating it to make the process less prone to errors. Having an automation software and combining it with processes that discourage manual journal entries can help you reduce your reporting and closing cycle time.
- Demand the capture and storage of manual entries
This is a very important practice to observe because many months down the road when questions about past transactions come up, it will be hard to trace without the proper capture and storage of manual entries. If you capture and store supporting notes or documentation about a specific entry, it will be a lot easier to retrieve them at a later time when the need arises.
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