Before jumping into how SoftLedger automates payroll the month-end close process, it’s worth noting that a key reason SoftLedger can automate the entire month-end close process is that it operates in real-time data. So below, we’ll show you how to manually close the month and introduce you to accounting software that automates the entire process for you. In addition, companies may be required by law or under certain accounting standards to produce monthly financial statements. For example, the financial statements produced at the month-end close can help businesses identify the most profitable and costly products, customers, or locations.

Automating the Month-End Close Process

A streamlined month-end close reduces errors and ensures that financial records are accurate and complete. This doesn’t just help you monitor your financial health—it keeps you in line with regulatory standards too. Accurate financial data is essential for audits, tax filings, and maintaining stakeholder trust.

What are the steps in the month-end process of closing the books?

As a result, the consolidation of financial data and the reconciliation of accounts can be a time-consuming endeavor. Thus, this process serves as a crucial checkpoint in a company’s financial management, allowing for the assessment of performance, planning for the future, and ensuring compliance with regulations. In this comprehensive guide, we will delve into the month-end close process, highlighting its significance, steps, and best practices to help you streamline your financial operations effectively.

What is the Month-End Closing Process?

Before we jump into the nitty-gritty of our month-end close process checklist, let's chat about setting the stage for success. Well, it’s not just about keeping the auditors happy (though that’s a pretty big deal too). It’s about giving you and your team crystal-clear insights into the financial health of your business. We get it – closing the books each month can feel like a massive task, filled with numbers, deadlines, and just a tad bit of stress (okay, maybe more than a tad). Whether you need to conduct an internal or external audit on your financial statements, the use of an automation tool will make this easier than ever.

• Streamline your month-end review with one centralized workspace inside Financial Cents.
• It’s not just about crunching numbers; it’s about ensuring every financial detail is accurate and up-to-date.
• In addition, companies may be required by law or under certain accounting standards to produce monthly financial statements.
• Once adjustments have been implemented, ensure all month-end close documentation is updated accordingly, and enroll any impacted stakeholders in training to ensure they’re comfortable with the new process.
• Automation is the key to reducing the time and effort required for the month-end closing process.

Top Challenges in Managing Accounting Firms Without Modern PMS

According to a 2017 study, 60% of finance and accounting professionals say their stress levels increase during month-end close periods, and 87% face challenges with their close processes. This number has likely risen due to the increasing complexity of financial reporting, stricter compliance requirements, and more sophisticated accounting standards. And for those handling this process for multiple clients with a range of service needs it’s even more time-consuming and overwhelming. Mastering the month end close process is critical for maintaining accurate financial records and achieving organizational success. By understanding the importance of closing entries, following a structured workflow, and leveraging technology, businesses can streamline their operations and ensure compliance. Standardized procedures help eliminate ambiguity by clearly defining the steps, roles, and responsibilities involved in the close Statement of Comprehensive Income process.

By dividing revenue by the average working capital, this ratio is able to link the revenue-generating ability to the efficiency of a company's daily operation. The following article will help you understand what working capital turnover ratio is and how to calculate it using the working capital turnover formula. It is ideal to have a working capital turnover ratio of 1.2 and 2. A low or negative working capital ratio means a company might be investing highly in inventory and accounts receivable to generate sales, which can lead to excessive obsolete inventory or bad debts. Use Tickertape Stock Screener to find the working capital turnover ratio of a stock. The working capital turnover ratio would then be calculated as follows –

Strategies to Improve Working Capital Turnover

Analyzing the ratio over multiple periods helps account for these variations. So, whether you're managing a bicycle factory or a tech startup, keep an eye on your operating cycle—it's the heartbeat of your business. Remember that the Quick Ratio is just one piece of the financial puzzle. This could signal financial distress. While not as liquid as cash, they are still relatively easy to convert into cash. ### understanding the Quick ratio

Evaluating Cash Solvency

It minimizes the need for excessive working capital, which can tie up funds unnecessarily. ## understanding the Working Capital turnover Ratio This indicates that Company XYZ has sufficient cash reserves to cover its short-term obligations and is in a favorable cash solvency position. In summary, the quick Ratio is like a financial sprinter—swift, focused, and ready to leap over hurdles. However, a ratio too close to 1 might signal vulnerability. Suppliers demand immediate payment, and the company's survival depends on its liquidity.

• It shows how much revenue a company can produce for every dollar of capital invested.
• This shows that for every 1 unit of working capital employed, the business generated 3 units of net sales.
• The ratio indicates how capable a business is of paying off its short-term liabilities using its current assets while managing its day-to-day operations efficiently.
• This is because a high-growth company may need to invest more capital in expanding its production capacity, acquiring new customers, or entering new markets.

PRODUCT

A spike in the ratio could be caused by a decision to grant more credit to customers in order to encourage more sales, while a dip could signal the reverse. There must be an investment in accounts receivable and inventory, against which accounts payable are offset. It usually takes a certain amount of invested cash to maintain sales. This can be a sign that the company is not efficient in its use of working capital.

Operational efficiency

• To improve its working capital turnover, the company can try to diversify its product portfolio, offer discounts or promotions, or sell its excess inventory to other businesses.
• The turnover ratios formula indicates how efficiently the assets and liabilities are managed in a particular period.
• Suppose a business had $200,000 in gross sales in the past year, with $10,000 in returns.
• Businesses should aim for a balance—neither tying up excess capital nor compromising on operational needs.

Your working capital turnover ratio is typically considered high when it is greater than the turnover ratios of similar companies within the same industry. The working capital turnover ratio shows the connection between the money used to finance business operations and the revenue a business earns as a result. The working capital ratio or the current ratio helps businesses measure their liquidity by dividing current assets by current liabilities. It indicates that the company is able to quickly convert its inventory, accounts receivable, and other current assets into cash, which is essential for sustaining operations and growth. From the perspective of investors and analysts, a high working capital turnover ratio indicates that a company is efficiently managing its working capital and generating sales. By understanding and actively managing the working capital turnover ratio, businesses can make informed decisions to optimize their financial health and drive sustainable growth.

Working Capital Turnover Ratio Formula

While having a high working capital turnover ratio is considered a positive sign, it may actually signify that a business does not have the sufficient cash flow to maintain its sales growth. A business that consistently operates with a high working capital turnover ratio needs a smaller ongoing cash investment than its competitors to produce the same level of sales that they are generating. The working capital ratio is directly proportional to current assets and inversely related to current liabilities, serving as a fundamental measure of a business’s financial solvency. This ratio helps estimate a business’s current assets as a proportion of its current liabilities and assess its operational efficiency and financial health. The working capital turnover ratio serves as a valuable tool for assessing a company's operational efficiency sales to working capital and capital turnover ratio and financial performance. The working capital turnover ratio is calculated by dividing a company's net sales by its average working capital.

This ratio offers valuable insight into how effectively management is utilizing working capital to drive revenue. It can be quite difficult to improve a company’s sales to working capital ratio. However, it should be interpreted in context with other financial ratios and industry norms. The sales to working capital ratio is calculated by dividing annualized net sales by average working capital. Thus, there is typically a ratio of working capital to sales that remains relatively constant in a business, even as sales levels change.

Gen AI Myths Holding Sales and Marketing Teams Back

The working capital is the difference between the current assets and the current liabilities. In this section, we will explain how to calculate the working capital turnover ratio, what factors affect it, and how to interpret and improve it using some examples. Company B has current assets of $200,000, current liabilities of $100,000, and annual sales of $300,000. Company A has current assets of $100,000, current liabilities of $50,000, and annual sales of $200,000. Working capital turnover is an important indicator of a company's financial health and operational performance. Working capital turnover is a ratio that measures how efficiently a business uses its working capital to generate sales.

Formula(s):

A low ratio (e.g., below 1) may indicate excess working capital or poor sales performance, though negative ratios can occur if working capital is negative (liabilities exceed assets). Also, proper legal compliance increases the market reputation, and investors’ attraction towards investment increases, which results in a higher capital turnover ratio. The higher the payback period, the higher the capital turnover ratio will be. To improve its working capital turnover, the company can try to diversify its product portfolio, offer discounts or promotions, or sell its excess inventory to other businesses. For example, a company that sells seasonal products may have a low working capital turnover during the off-season, when its sales are low and its inventory is high. Therefore, it is more meaningful to compare the working capital turnover of a company with its historical performance, its peers, or its industry average, rather than using a universal benchmark.

The ratio indicates the extent to which current assets are sufficient to satisfy its current liabilities. Another use of the working capital turnover ratio is to evaluate short-term liquidity. The working capital turnover ratio denotes the frequency with which working capital is exchanged annually.

A manufacturing company, on the other hand, may have a lower capital turnover ratio because it has higher fixed assets and inventory levels, which increases its capital requirements. For example, a retail company may have a higher capital turnover ratio than a manufacturing company, because a retail company has lower fixed assets and inventory levels, which reduces its capital requirements. A low-growth company, on the other hand, may have a higher capital turnover ratio because it can leverage its existing assets and customer base to generate more sales. For example, if your capital turnover ratio is higher than the industry average, it means that you are more efficient than your peers in using your capital to generate sales. Industry benchmarks are the average or median capital turnover ratios for your industry or sector, which you can find from sources such as industry reports, databases, or websites. Seasonality and business cycles can affect your net sales and total assets, and therefore your capital turnover ratio.

That said, if your working capital turnover ratio is too high, it may be misleading. That means they have a working capital turnover ratio of 4. The resulting number is your working capital turnover ratio.

Monitor and reconcile your accounts payable records regularly and accurately. Leverage your cash discounts and take advantage of them whenever possible. This will help you maintain a good relationship with your customers and improve your cash flow. VMI is a method that allows your suppliers to manage your inventory levels and replenish them when needed.

Why is working capital turnover important? A working capital of five would mean that a company is generating five times its revenue per dollar of working capital. They argue that cost of goods sold has a more direct relation to the efficiency with which working capital is used in the business. Being able to efficiently determine how to use cash most profitably can increase your company’s overall financial health. In other words, it displays the relationship between the funds used to finance the company’s operations and the revenues the company generates as a result.

What is Working Capital Ratio and How to Calculate It

Other factors, such as industry dynamics, market conditions, and management strategies, also play significant roles in determining business performance. A higher ratio generally indicates that a company is efficiently managing its working capital, which can lead to improved profitability and liquidity. It provides an indication of how efficiently a company utilizes its working capital to generate sales. By analyzing this ratio, businesses can gain valuable insights into their financial health and identify areas for improvement.

How to adjust for seasonality and business cycles. However, there are some challenges and considerations that you need to be aware of when collecting and analyzing this data. This suggests efficient utilization of resources and effective management. Merwin Inc. gives you the following financial information for 2018. Credence Inc. gives the following information about its business. This refers to the total amount of sales conducted by a firm in a given period of time.

A healthy ratio enhances a company's creditworthiness. The working capital ratio is 1.67 ($500,000 / $300,000). However, excessively high ratios may indicate inefficient asset utilization. With over 5 years of experience in the financial industry and insatiable curiosity, I bring complex financial topics to life in a way anyone can understand. A low ratio indicates inefficient utilisation of working capital over time and vice-versa. Analysis of this ratio can enable companies to utilise their resources and working capital better.

These services take care of transaction recording, payroll, and financial reporting, allowing businesses to focus on expansion while reducing errors. Many SMBs choose a hybrid model, keeping a small internal finance staff while outsourcing specialized tasks like tax compliance, payroll, or FP&A. Most outsourcing firms adapt to popular platforms such as QuickBooks, Xero, or NetSuite. If you use custom tools, ask about integration support or migration planning to avoid workflow disruptions. Check whether the provider follows recognized standards such as SOC 2, ISO 27001, or GDPR compliance. Managing books, payroll, and compliance internally often drains valuable time that could be spent on growing the business.

Outsourcing Accounting Functions in Healthcare and Pharmaceutical Industry

Any specific questions you may have can be sent to /contact and we would be happy to assist you. You can then use the dashboards available on your desktop or mobile device to monitor your financials in real time — 24 hours a day, seven days a week, and 365 days a year. Each company should evaluate its specific needs and consider the potential benefits of outsourcing before deciding. Accounting Record Keeping for Small Business firms can handle increased workloads, seasonal variations, and new accounting challenges. In fact, 71% of financial service executives outsource or offshore some of their services.

Cost savings

• North America’s finance and accounting outsourcing market is projected to grow by 8.7% annually through 2028.
• A reputable provider should offer detailed cost structures, allowing you to understand exactly what you’re paying for and ensuring there are no surprises when the bill arrives.
• This trend highlights the growth of the business process outsourcing market, as companies are increasingly turning to outsourcing to enhance efficiency and leverage specialized expertise.
• With the help of an outsourcing partner, onboarding remote finance professionals is effortless, getting them to work quicker and without the long recruitment process.
• This involves evaluating their expertise, security measures, and technology capabilities to ensure a smooth transition and continued financial efficiency.

Furthermore, outsourcing to an accounting firm allows you to work with a team of financial experts. You may rest assured that your accounting is in the hands of a reliable and knowledgeable business if you choose an outsourcing provider wisely. When paying employees’ salaries on an hourly or monthly wage, you must consider recruiting, onboarding, employee benefits, and insurance. These issues can quickly drive up operating costs, making an in-house accounting team more trouble than it’s worth.

How to Choose the Right Finance and Accounting Outsourcing Provider?

Businesses must assess the provider’s technical competence, particularly their proficiency with accounting software such as QuickBooks. Mastery of these tools is indicative of efficient processing of financial transactions and accurate bookkeeping. Companies should confirm that the service includes software use, technical support, and any necessary integrations or customizations.

What Does the Global Outsourcing Landscape Look Like Today?

BruntWork leads the market in outsourced accounting and bookkeeping services, offering solutions for businesses of all sizes. Handling financial records can be time-consuming, but outsourced bookkeeping services offer an efficient way to manage business finances. A recent survey conducted by BruntWork found that 82% of businesses that outsourced their bookkeeping reported increased efficiency in financial management. Yes, reputable providers use encrypted cloud systems, secure servers, and compliance certifications like SOC 2, GDPR, or HIPAA (for healthcare). Data security should be one of the first questions you ask before signing with a partner.

Cost Savings Compared to Hiring Full-Time Staff

• Outsourced bookkeeping services can scale with a company’s needs, offering flexible solutions that adjust for variations in workload and the complexity of financial data.
• From cash flow visibility to strategic insights, a good provider helps you make smarter, faster business decisions.
• With access to real-time financial data from virtually anywhere, these technologies make collaboration easier and more efficient.
• If you think you can get by without any accounting function, you’re in for a whirlwind of a surprise (and not in a good way).
• If you’ve ever nixed the idea of outsourced accounting from your list of potential strategies, you’re not alone.
• Easily identify areas for improvement, implement change and achieve better results for your company.

A knowledgeable outsourcing partner can connect you with highly skilled, global finance professionals. It is important to choose reputable outsourced providers for ongoing support, compliance, and strategic financial management. Outsourced firms leverage technology, unearned revenue automation, and regulatory expertise to deliver value and ensure your business remains compliant.

• For a flexible and cost-effective solution, hire a virtual assistant to manage bookkeeping today.
• Reputable outsourced accounting firms prioritize data security and the protection of sensitive financial information.
• This trend is particularly beneficial for small businesses, which find value in leveraging cost-effective solutions while accessing specialized expertise.
• Hiring an accountant can be a daunting task for several small businesses and startups.
• Whether through a bookkeeping firm or a virtual assistant, businesses that rely on external support gain financial accuracy without the hassle of hiring in-house staff.
• Trusted by over 25,000 American small business owners, Bench provides services like monthly financial statements, real-time insights, and comprehensive tax support.
• They leverage external expertise to manage finances effectively while they concentrate on delivering advisory services to their clients.

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RSM Global specializes in providing personalized service to Bookkeeping for Any Business Industry mid-sized firms with international requirements. IBM leverages advanced AI and automation capabilities to deliver next-generation accounting solutions. Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014.

If your business operates in a specific industry, ensure the provider has experience in that sector to better understand your finance and accounting needs. Outsourcing can provide several benefits, including cost and time savings, as you will no longer need to oversee the hiring and training of in-house accounting employees. This allows businesses to redirect internal staff and resources to support higher-value, core business operations and boost productivity. Outsourcing can also provide access to a broader skill set with experts who are equipped to help minimize fraud risk, handle compliance regulations and provide accurate financial reporting.

• This practice enables businesses to focus on core activities while leveraging the expertise of specialized accounting firms.
• Outsourced accounting relies on external professionals who are already equipped to manage a business’s financial operations.
• Nearshoring to Mexico is becoming increasingly popular for US businesses due to its skilled workforce, geographical proximity, time zone alignments, and cultural similarities.
• Growth is especially driven by small- and mid-sized businesses, which now have access to sophisticated services that were once only available to large enterprises.
• When you use bookkeeping outsourcing services, you receive access to a team that relies solely on their accounting services for revenue.
• This ensures that your business stays up-to-date with legal obligations, minimizing the risk of costly mistakes or penalties.
• Your business needs may evolve over time, so it’s important to choose a provider that can scale its services accordingly.

Our accounting teams operate as an extension of your in-house staff, ensuring seamless collaboration and communication. By working together as one cohesive unit, we help ensure your financial operations run smoothly and efficiently. We prioritize a close partnership with our clients, striving to understand their unique business needs so we can tailor our accounting services accordingly. In every step, we assure our partners that they can maintain control over their financial processes, keeping all activities aligned with their goals. North America’s finance and accounting outsourcing market is projected to grow by 8.7% annually through 2028.

Professional financial analysts can perform ratio analysis, trend analysis, and other data-driven evaluations to help you make strategic decisions. Managing accounts payable involves scheduling and making payments to suppliers and creditors. Outsourcing these disbursements can enhance cash flow management, ensuring that payments are made efficiently and on time to maintain solid business relationships. Likewise, the flexibility in outsourced accounting allows for a responsive approach to sudden market changes or unexpected financial scenarios, ensuring that SMEs are not left vulnerable. A bookkeeping service should offer reliable financial support, strong security, and seamless integration with existing accounting tools. This connects with the idea of outsourcing non-core functions—businesses can shift bookkeeping to external professionals while focusing on priorities like sales and operations.