The month-end close can be full of bottlenecks, especially when the monthly close process is heavily manual. As a result, individual pieces like the journal entry (JE) process become overly difficult, complicated and frustrating. Many finance and accounting (F&A) professionals experience an overly painful, delayed journal entry process.

What are the Most Common Journal Entry Challenges Organizations Experience?

1. Creation of the JE
2. JE Approval
3. Journal Posting
4. JE Process
5. Journal Entry Quality

These five challenge areas lead to bottlenecks and delays in the financial close. Ultimately, they must be fixed to optimize the monthly close process, and there are many best practices for journal entries to solve these issues.

Journal Entry Challenge #1: Difficulty Creating Journal Entries

In a recent Trintech poll, 60% of respondents said that the creation of journal entries was their biggest pain point within the JE process. Some common journal entry challenges when it comes to creation included:

• Working with inadequate, frustrating spreadsheet templates
• Requestors not always having the right finance background to complete the templates
• Journals frequently being forgotten before posting

Across enterprise organizations, there are typically so many journals to be created in the monthly close process that it consistently creates a major financial close bottleneck.

Journal Entry Best Practice #1: Create Standard Templates

Having a standardized template will significantly minimize the manual work it takes to create a journal. However, don’t try to fit every journal into one standard template. Instead, start by creating a standardized template that will best fit the majority of your organization’s journals based on their similarities.

For the remaining journal categories, streamline and simplify their creation by identifying their key data fields and creating a secondary generalized template with those fields. If you’re utilizing a journal entry software solution such as Cadency^® by Trintech, you can leverage pre-existing templates that have been created from the input of many customers.

Challenge #2: Confusing Approval Process

A trademark of a primarily manual monthly close process is the lack of clarity in the journal entry review and approval process which creates frustration and confusion around the entire process and causes delays and inaccuracies.

For an efficient JE process, organizations must ensure that the appropriate personnel are approving the right entries. There also needs to be visibility to see into the status of each journal — is it still with the approver, or has it already been approved? Is there a bottleneck that should be addressed?

Journal Entry Best Practice #2: Clearly Define the Approval Process

Documenting the proper journal entry approval process lessens confusion and prevents journals from simply being approved by the nearest person available. Additionally, by using journal entry software, leadership can ensure that journals are automatically routed to the right person for approval, whether that’s based on the company, that cost center, or a certain materiality value.

A clear journal entry approval process enforced via an automated journal entry solution streamlines the flow of journals and enforces a more risk-based approach to the financial close.

Challenge #3: Time-Consuming Journal Posting

The journal posting process itself is time-consuming, especially because F&A teams rely on spreadsheet templates which inherently generate errors. Identifying and correcting those errors then slows the entire posting process down. Fortunately, this is another common journal entry challenge that journal entry software can alleviate.

Journal Entry Best Practice #3: Automate Approval Workflow & Posting of Routine Journals

An automated journal entry solution can expedite the approval process by integrating with the organization’s ERPs, allowing the entries to be validated from a technical lens.

Then, the assigned approver can inspect the journal by evaluating the financial impact of the entry, rather than simply from a technical perspective. This will speed up the entire process significantly while also increasing effectiveness.

Challenge #4: Overall JE Process

In the recent Trintech poll mentioned earlier, the remaining 40% of respondents cited the overall journal entry process itself as their biggest JE pain point. Specific challenges included:

• Business partners requiring rapid posting to review their figures
• Increased write-offs due to a poor journal entry process
• High volumes of low-value journals slowing the entire process down
• Satisfying auditors looking for a completeness check

Journal Entry Best Practice #4: Resolve Overdue Journals with Journal Entry Software

An automated journal entry solution has the ability to set approval times on certain journals to help ensure entries are posted on time.

When the journal exceeds the set time period to be approved, the approver will receive an automatic notification reminding them the journal needs to be reviewed. With a complete Record to Report solution like Cadency that includes journal entry, reporting dashboards will allow leadership to see the criteria that results in late journals so the organization can adjust and streamline the process for the future.

Challenge #5: Struggling with Journal Quality

High volumes of entries in the monthly close process result in poor close quality. And because of the manual nature of the JE process, sufficient documentation isn’t able to be kept. Not only does this complicate the audit process, resulting in audit queries and increased write-offs, but entry quality can then never be reported on, revisited and evaluated to improve the future process.

Journal Entry Best Practice #5: Ensure Completeness of Trial Balance Through Reviews

When it comes to journals, it’s commonly thought that 80% of the process is compiling the data, and the other 20% is reviewing it. But what if that were flipped? Utilizing journal entry software that integrates with the ERP, enforces standardized templates and automates routine journals can give organizations more time to perform a complete review of the trial balance.

Optimizing the JE Process With Journal Entry Software

In another Trintech survey, 67% of respondents said they were trying to solve some of these JE process issues with an ERP — but ERPs can’t solve the most common journal entry challenges. To effectively improve the JE process, policies specific to the organization must be developed and enforced. An ERP isn’t capable of providing that solution, but a complete Record to Report solution like Cadency that includes an automated journal entry solution is very capable and provides true ROI for best-in-class organizations that are leveraging it today.

It’s time to move away from manual processes, which the journal entry process tends to be full of, and learn how automation can alleviate your biggest journal entry problems.

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Leading organizations like Ingram Micro decided to invest in a comprehensive financial close solution and fix their journal entry issues as part of the financial transformation journey. Explore their journey here.

Written by: Ashton Mathai