Best Practices for Monthly Accounting Close

by Feb 10, 2023Optimize Accounting

What should your accounting close process look like on a monthly basis?

This was one of the topics I recently wrote about within the CFO Connect community as part of the First 100 Days as a CFO/Finance Lead. I give you a little preview into one of the topics below 👇 , if you would like the full publication, please reach out!

I’ll cover the quarterly close process separately, as this captured more of a hard close around accruals, amortizations, etc..

  1. Bank reconciliations – Perform bank reconciliations to ensure all cash inflows and outflows are captured in the ledger appropriately.
  2. Customer accounts – Ensure all invoices generated are recorded in revenues & customer payments are captured in receivables, and book VAT collected accordingly. BONUS: Track revenue earned but not yet invoiced, as well as deferred revenue.
  3. Vendor accounts – Ensure all invoices received are recorded in expense, vendor payments are captured in payables and book VAT paid accordingly. BONUS: Track goods/services received but not yet invoiced, and prepaid expenses.
  4. VAT reconciliation – Based on above, reconcile VAT receivable/payable accounts to monthly VAT returns. Ensure payments received from/made to tax authorities are recorded appropriately & reconciled to underlying returns.

Is there anything else you would add to the list ❓

Navigating US GAAP Conversion as a European finance team

An excerpt from my CFO 4.0 podcast interview

As an experienced cross-border accounting advisor, I’ve dedicated significant parts of my career to helping companies bridge the gap between European and U.S. accounting standards.

Particularly, mastering U.S. Generally Accepted Accounting Principles (US GAAP) poses a substantial challenge for UK and European businesses aiming to expand their investor footprint into the U.S. market.

My recent discussion on the CFO 4.0 Podcast shed light on the nuances and critical strategies required to make this transition as smooth as possible.

Here’s the top takeaways: 

1. Pre-Audit Preparation is Crucial

Transitioning to US GAAP is an intricate process that demands meticulous preparation. Before even considering an audit, it’s crucial to have a well-documented finance function.

This includes thoroughly analyzing your chart of accounts, policies, and transactions under current GAAP.

From there, my recommended approach involves a three-phased method: starting with discovery, followed by a qualitative differences analysis, and finally, crafting a matrix of existing policies alongside suggested US GAAP policies.

2. Understand Strategic Audit Differences between Countries

The audit process under US GAAP is more rigorous compared to that in the Europe, focusing significantly on accuracy and a detailed audit trail.

My experience has shown that European companies often need to recalibrate their expectations and practices to meet these stringent requirements, which encompass not just financial scrutiny (i.e. a lower audit materiality) but also a broad evaluation of corporate governance and internal controls.

3. Thoughtfully Structure your Conversion Approach

I align my strategic advice for GAAP conversion along a well-structured three-phase approach. It begins with a qualitative and quantitative assessment of financial statements, transitioning into the actual preparation of these statements under US GAAP. Depending on the complexity and the readiness of your company, this transition can take between two to six months. Throughout this period, patience and openness to adapt to stringent U.S. standards are essential.

4. Gain an Understanding of US Regulations

Entering the U.S. market, especially in heavily regulated industries like fintech, necessitates a deep understanding of the U.S. regulatory environment.

For example, a UK-based fintech entity establishing a subsidiary in the States would require comprehensive US GAAP conversion from day one, not only for legal compliance but for operational and strategic alignment with U.S.-based stakeholders.

5. Ensure Documentation Supports Knowledge Transfer

Effective documentation practices not only ensure compliance but enhance operational efficiency and transparency. Recognizing a prevalent gap in knowledge sharing and ongoing support for European entities, I have developed a comprehensive guide available on my website, designed to aid companies in understanding and preparing for US GAAP requirements (you can find the link to access this guide below).

Listen to the full podcast here to gain insights in adopting a proactive, well-informed strategy when tackling US GAAP conversions.

Preparation, strategic phased implementation, and continuous education and support create a solid groundwork for international companies aspiring to thrive in the U.S. market. 

For those interested, my Notion guide can be accessed below.

Katrina Nacci

Katrina Nacci

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