The two phrases that make almost all accounting and finance professionals sweat a little are month-end and year-end close. The book closing process is where accountants record, reconcile and review all business transactions and data for a set period - month or year. Also, the month-end close process is important for the finance team to capture, inspect and prepare all the financial reporting for internal and external stakeholders.
For ecommerce companies, thousands of transactions, payments, and cash settlements are happening daily. If the companies don’t have a firm grip and clear understanding of the financial data in a timely manner, many discrepancies may get overlooked, and internal teams could use inconsistent data to conduct forecasting, leading to incorrect business decisions.
Month-end close is critical for companies and having timely and accurate financial data is essential. Here are the benefits of processing your month-end close on time.
- Identify discrepancies in transactions, payments, or cash settlements early
- Use accurate data sets to make sound business decisions
- Address issues or blockers within your business quickly
- Save a significant amount of time and money by not doing bookkeeping
- catch-up Make tax filing, diligence, fundraising, or any financing activities easier
- Easily maintain traceable and organized records at every step - be audit-ready!
Data accuracy is vital because it allows companies to fully understand their revenue, expenses, and risks before making key business decisions.
We’ve compiled a checklist to help make your next close process seamless.
Sales-related Close Checklist
- Create a closing schedule with key dates, owners, and data sources
- Book sales figures
Record sales entries and refund expenses in the general ledger
Review order fulfillment and recognize revenue
Review deferred revenue and book adjustments
- Book your cost of goods sold
Record your cost of goods sold, if not automatically linked to fulfillment and revenue recognition
Reclassify cancellations, replacement orders, and marketing or other product giveaways
- Reconciliation
Book payment processor fees
Reconcile orders and processor fees to payouts at the bank
Review cash in transit balances from the prior month and the current month
- Review assets and liabilities
Review gift card balances, redemptions, and expirations
Review sales tax collected and remitted
1. Create a closing schedule
A closing schedule ensures you’re prepared and aligns expectations among the teams. It gives a clear guideline for when each item needs to be completed and helps avoid any uncertainties while building a solid foundation for each month-end close.
2. Book sales figures
- Record sales entries and refund expenses in the general ledger
- Review order fulfillment and recognize revenue
- Review deferred revenue and book adjustments
Record sales and increase corresponding holding accounts (or accounts receivable) on the balance sheet. Recognize revenue for the period and make any other adjustments to the deferred revenue account.
Data may come from a single source or multiple sources depending on the number of sales channels. It is important to trace every transaction and cross-reference it to invoices and bank statements for data completeness and accuracy.
Blue Onion tip:
Instead of trying to download Excel files from multiple sources and consolidate them into a large spreadsheet, you can leverage Blue Onion to automatically pull in your company’s order and payment data. All sales transactions, merchant fees, and cash settlements are synced, reconciled, and organized in one place. Blue Onion takes it even further to show you key balance sheet figures such as gift card liability, deferred revenue and holding account balances.
3. Book cost of goods sold
- Record your cost of goods sold, if not automatically linked to fulfillment and revenue recognition
- Reclassify cancellations, replacement orders, and marketing or other product giveaways to expense accounts
This step is a reminder to match your sales with your cost of goods sold. We also recommend making a note to reclassify revenue and product costs that may be related to non-sales activity like product for marketing events or customer service issues.
Blue Onion tip:
Blue Onion automates your revenue recognition entries and can support adjusting inventory entries. With our data engine, Blue Onion captures each unit’s fulfillment date and status, including items that have been cancelled. This data allows us to easily track deferred revenue balances. We also capture order tags, discount codes and complimentary orders so it’s easier to identify those transactions that may be related to marketing or customer service activities, and not sales.
4. Reconciliation
- Book payment processor fees
- Reconcile orders and processor fees to payouts at the bank
- Review cash in transit from the prior month and the current month
It’s time to reconcile your transactions from orders to payments to the final cash settlements in your bank account. This is where you determine key figures such as open accounts receivable (or holding account) balances and payment processor fees. The biggest challenge is when transactions and balances don’t line up, requiring deeper investigation.
Blue Onion tip:
we automatically match each order to a cash payout in your bank account and provide transaction-level detail into your open holding account balances. We’ll also identify payment processor fees so you can easily reconcile your bank account. We handle all of the data cleaning and matching so you can be confident in your key financial figures.
5. Review other related assets and liabilities
- Review gift card and/or loyalty program balances, redemptions, and expirations
- Review sales tax remittance
To enhance the customer experience, ecommerce companies may offer multiple payment methods, marketing promotions, and discounts. Common offerings include gift cards, special discounts, buy one get one free, complimentary products, and free returns or exchanges. While important from a revenue generation perspective, these programs can complicate the close process so it’s essential to fully reconcile each of these transactions.
Blue Onion tip:
Blue Onion offers integrations with leading gift card, return services, and reward programs so you can automatically handle the complexity related to these third-party programs like Loop, Returnly, Happy Returns, Catch and Rise.ai.
Month-end close doesn’t have to be a tedious or painful process. It can be streamlined and simplified. Blue Onion helps to automate the manual order-to-cash reconciliation process so you can make verify your sales transactions and ensure your company is getting paid for every order. We’ve saved our clients hours to several days each month by working smarter and helping them do more with less.
Disclaimer: The information provided in this article is intended as general guidance only and is not intended to be nor should it be considered legal or financial advice. You should consult with your CPA to review your business' specific accounting issues and challenges.
