Month-end close automation

Month-end close automation can significantly reduce the need for manual work, increasing the speed and accuracy of your accounting processes. Let’s explore how it works, how to find the right solution, and how to implement it effectively.

What is month-end close automation?

Month-end close automation is the use of software to streamline recurring financial processes. Modern solutions often leverage artificial intelligence (AI) and machine learning to complete tasks. 

This reduces the need for manual processes and allows tools to grow more accurate over time, helping you finalize your books more efficiently each month.

How to automate the month-end close

Let’s explore how you can use digital solutions to streamline various aspects of the month end close process.

1. Automate transaction matching

Transaction matching involves comparing transaction details across multiple sources of financial information—such as bank statements, invoices, and the general ledger—to verify that all your records align.

This process is essential for maintaining accurate documentation, but it can be time-consuming and prone to error when performed manually. In addition, the higher your financial transaction volume grows, the more burdensome it becomes.

In other words, transaction matching is ripe for automation, with leading tools using predefined rules and algorithmic logic to streamline the process. 

This goes beyond simply matching vendors, quantities, and processing dates, allowing them to account for complexities like partial payments or timing differences.

2. Identify uncategorized transactions

Even the most powerful matching software will occasionally encounter transactions that it doesn’t know how to record. For example, it may lack the context necessary to eliminate a duplicate transaction that occurred due to a system glitch.

Tracking down and resolving these issues is another aspect of the month-end close that often causes delays. However, modern tools can significantly streamline the process, identifying and aggregating transactions that need attention in one convenient place.

From there, you can review, confirm, or make adjustments to categorizations efficiently. In addition to saving time, this helps prevent any discrepancies from slipping through the cracks.

3. Automate reconciliations

While transaction matching and categorization focus on individual entries, reconciliation takes a broader view. It involves confirming that the total account balances in the general ledger tie to supporting documents, such as bank and credit card statements.

Once again, this process can be one of the most time-consuming aspects of the month-end close. In fact, the American Productivity & Quality Center found that it takes organizations a median of six hours to reconcile the general ledger.

Month-end close automation tools can use similar AI and machine learning algorithms used in transaction matching to streamline reconciliations. That allows them to automatically check each account balance and flag those that need manual review.

4. Expedite receivables and payables

Accounts receivable and payable are often two of the most labor-intensive aspects of financial management. 

On the receivables side, you have to track outstanding invoices and payments for each customer. 

On the payables side, you have to manage both employee reimbursements and vendor payments.

Because these processes involve many different data sources, tracking everything by hand can quickly become overwhelming. Similarly, identifying and resolving errors tends to be quite the headache.

Automation tools can greatly reduce the need for manual work by syncing data between accounting, billing, and payment systems. For example, they can match incoming and outgoing payments to open invoices, providing instant visibility into cash flows.

5. Automate approval workflows

Approval workflows play a central role in maintaining compliance with company guidelines, like spending limits and reimbursement policies. However, when they involve manual email chains and sign-offs, they often create bottlenecks in the monthly close.

Software can make the process much more efficient by routing approvals automatically according to predefined rules. In many cases, tools also include supporting features like automatic reminders that can help to keep requests moving.

In addition to improving efficiency, automated approval workflows can help strengthen internal controls. Not only do they ensure the right parties sign off as necessary, but they also create a clear and accessible audit trail.

6. Automate foreign currency conversions

If your business operates internationally, managing foreign currency transactions can be one of the most complex aspects of your month-end close. When converting values by hand, it’s all too easy to use incorrect exchange rates that distort your financial results.

As a result, automation tools are invaluable here. They can pull foreign exchange (FX) rates in real-time, allowing them to consistently calculate the proper values and easily match payments to invoices across currencies.

FX tools can also standardize the calculation of currency gains and losses, which occur when rates fluctuate in the period between when a transaction is recorded and when it’s settled. This helps support compliance with accounting standards.

7. Streamline timing difference reconciliations

Reconciling timing differences is often another tedious part of the month-end close. This refers to mismatches between data sources due to funds in transit or deposits in progress around cut-off dates.

When working manually, it can take finance teams hours to determine that these are causing discrepancies, but with the right accounting software, you can identify them automatically.

In addition, digital tools can often help streamline the process of resolving these issues. Once pending transfers are finalized, many systems can clear basic timing differences without manual intervention.

Month-end close automation tools

Not all month-end close automation tools are created equal, and choosing the wrong one can result in less than optimal improvements to your workflows. Here are some tips to help you find the right solution for your business:

• Define ideal features: Review your current month-end close process and determine which aspects are most important to automate. This should help you narrow down prospective options efficiently.
• Get recommendations: Consider asking members of your network to point you in the right direction. In addition to providing high-quality leads, this allows you to gain insight into the tools from someone you trust.
• Check customer reviews: If no one in your network has worked with month-end close automation tools they’d recommend, crowdsourced reviews can be another good way to assess the average customer experience of a given solution.
• Use free trials and demos: Take advantage of opportunities for hands-on testing before committing to a new automation tool. This will help you gauge whether the product is a fit much more effectively than anything else.

Avoid making your decision based solely on pricing. While affordability matters, a cheaper platform that lacks functionality will often end up costing more than you saved due to long-term inefficiencies.

How to create a month-end close process with AI

Thanks to recent advancements in AI, you may not need a dedicated automation tool to streamline your month-end close. 

Some of the most accurate financial reporting platforms now include AI agents that can design and execute customized workflows, providing a viable substitute.

Like chatbots, these agents are intelligent assistants you can communicate with using natural language. However, they’re much more powerful, capable of performing complex, multi-step tasks and making decisions with some level of autonomy.

Zeni’s AI Accountant Agent is a great example. Integrated directly with our automated bookkeeping software, it has a conversational interface you can use to build workflows intuitively and streamline processes like:

• Scheduling recurring journal entries
• Categorizing and matching transactions
• Identifying and correcting misrecorded activities
• Detecting and analyzing spending fluctuations

This can give you more control and flexibility over the construction of your month-end close automation, allowing you to tailor it to your business. If you have unique workflows that don’t map well to standard tools, this may be a better option.

How to measure and monitor performance at the month-end close

Measuring your month-end close performance before and after automating processes is essential for maximizing efficiency gains. Without tangible data, you risk replacing old bottlenecks with new ones or failing to reduce overall expenses.

Generally, the two most useful metrics to track are hours saved and costs saved. Hours saved refers to the amount of manual work you manage to eliminate, while costs saved translates that into a monetary value.

In addition to evaluating these metrics for the close process as a whole, make sure to calculate them at an individual workflow level. You don’t want to miss out on opportunities to improve specific processes.

This is another area where Zeni’s AI Accountant agent can be invaluable. Its virtual bookkeeping services include a built-in performance monitoring feature that automatically tracks time and cost savings.

How Zeni can help improve month-end close processes

Zeni is an all-in-one financial management platform designed to provide everything your business needs in one place. Many of our products and services can help streamline your month-end close, reducing manual data entry and improving accuracy.

For example, our AI bookkeeping automatically records transactions and uses machine learning to become more accurate over time. As a result, you’ll end each month with fewer transactions that need human attention.

When issues arise, your dedicated accounting team will step in to handle them. If any transactions require your personal attention, you’ll find them all in one convenient location, making it easy to review, comment, and resolve them quickly.

Beyond bookkeeping, Zeni also includes AI-powered bill pay and expense management tools. These can automate repetitive tasks like capturing invoices and expense receipts, routing approvals, and processing payments.

In addition to built-in automation, Zeni offers a suite of AI Agents that can handle more complex month-end tasks. Alongside the AI Accountant Agent, that includes AI Expense, AI CFO, and AI Bills Agents, each with their own unique capabilities. 

Schedule a demo to learn more about how Zeni can make your month-end close faster and more accurate.