Record to report / R2R – General Accounting – Book Closures

In our last upload, we had shared the components of an inter company entry process. And the key for a centralized entry process was that the unit, outsourcer / back office, will be in a position to examine the books of both the units simultaneously, thus reducing the effort of the reconciliation team.

Next sub-process of general accounting is Book Closures. In almost all ERP systems, it is mandatory that periodically book closures are effected. Book closures technically come from the concept of posting. ERPs are modular systems. So each block normally works independent of the other. You would have Cash Book modules, Accounts Payable, Accounts Receivable modules, You will have a Journal module. Depending on the setup, there may be more. And finally there will be a GL module.

Now for the summary of the entries in the primary modules will need to reach the GL module, so that a trail balance can be drawn. Most companies would prefer doing this once every month. Companies draw up an accounting calendar each fiscal year for this. Some go by the month, and some have their own cycles. The most interesting cycle seen by me was a 4-4-5 week cycle each quarter. This means that the first & second month in each quarter will be 4 weeks exactly, and the third month 5 weeks. This gives a good balancing and the variation / mid-week dates of closure are avoided.

I will talk more on this in the next post.


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