In this episode, we discuss how the use of journal entries can be altered in order to improve the closing speed. The general concept is to only create journal entries for larger amounts, ignoring all smaller ones that will have a minimal impact on the financial statements. Key points discussed are:
Reduce the number of journal entries by eliminating those having a minor impact on the financial statements.
Schedule an accruals review once a quarter, to see if any accruals can be eliminated.
Eliminating journal entries reduces the risk of not reversing accruals, since there are fewer accruals to be reversed.
Use a standard list of journal entries, to ensure that the same entries are made every month.
Assign responsibility for journal entries, where only one person can make entries. Doing so eliminates the risk of duplicate entries.
Create standard journal entry templates, so that the same formats are used on a consistent basis.
Set a journal entry reversing flag in the accounting software, so that each accrual is reversed automatically.
Set up recurring entries for those journal entries that do not change much from period to period.
Create a definition for those accounts that tend to confuse people.