Do you have a process to ensure a complete and accurate month-end close of your MRI system? If not, allow REdirect to make a few suggestions. A free EOM checklist is also available to download at the bottom of this blog post!
A “good” month-end close process utilizes information from both inside and outside of your MRI system to ensure that all of the data that could be entered has been entered; has been entered correctly (correct period, correct transaction); and has been transferred to the General Ledger. It allows for a preliminary review and system balancing; correction of errors; and re-review prior to closing each module and producing your final reporting package for the owner.
REdirect recommends (and so does MRI) that you begin your close process with your Accounts Receivable module. This is because MRI has the potential to create transactions from RM or CM to Accounts Payable for items like Security Deposit and Rent refunds. If you were to close Accounts Payable first, these A/R transactions would be forced into the next Accounts Payable period. When preparing to close Accounts Receivable, consider the following activities:
Verify that all current period receipts have been posted to the A/R module. This is usually done by comparing a batch posting or cash detail report from the MRI system to your bank statement (or to your on-line bank information). For MRI Commercial Management we recommend the MRI_CASHDETL report.
Check for items that may have been posted out of the current period date or period range (i.e. – did someone post a March receipt to the April period? Did someone use the wrong year in a date but the right period for posting? The best way to check for this type of mistake is to compare each tenant’s “last month” ending A/R balance to “this month’s” beginning balance. MRI_LEDGER is a great CM report to use for this.
Look at your aged delinquency report, and specifically at open credit amounts. Are there any items that should be applied out? Are there any items that could be refunded? Perform ledger maintenance as is needed and appropriate.
Take another look at your aged delinquency report, this time focusing on open charges. Have late items been addressed? Did you assess late fees and send late letters? What is your write-off policy? Do any of the open, delinquent items apply? Perform additional ledger maintenance as needed and appropriate. Did you know you can use the DELQ reference type in CM Lease Notes to explain delinquent and open items and have those notes appear on the MRI_CMAGEDEL report?
Review the security deposit ledger. Are there any items that can be applied to open A/R, refunded or forfeited? Perform security deposit ledger maintenance as is needed and appropriate.
Perform a Rent Roll review and validation – verify the status of each tenant for the reporting period; the accuracy of critical dates; the accuracy of current and future charges reported. Validate that all vacancies are accurately reflected. Validate the square footage and occupancy/vacancy percentages.
Once you have completed these items, cut off processing for the period in Accounts Receivable. Calculate your management fee and create the invoice for Accounts Payable. Create journal entries from your Accounts Receivable module to General Ledger.
Time to move on to Accounts Payable…
Verify that all invoices for the current period have been entered into the system. This is recommended, even if you pay on a cash basis – take advantage of the many A/P reports available to manage your payables. You can also compare your payables to the property budget – did you budget for an expense that you haven’t been invoiced for? Some properties keep a master list of common payables like their utilities and recurring services to make sure they get paid each month.
Have all check runs for the current period been processed?
Use MRI_DISTLST to review expense classifications and re-class any items as needed.
Once you have completed these items, cut off processing for the period in Accounts Payable. Create journal entries to the General Ledger.
Up to this point, our activities have focused on ensuring the completeness and accuracy of information in the sub modules and finalizing the activity there for the month. Now we can work on balancing the system. For these activities we recommend that you use MRI_GENLEDG and MRI_TRBAL reports.
Verify that the General Ledger is in balance by looking at the balances on the MRI_GENLEDG and MRI_TRBAL reports.
Do you use suspense or clearing accounts? Check these accounts next and make the necessary transactions to bring these to a zero balance – or provide an explanation for any balance that remains. For example, an amount may remain in a clearing account in some MRI setups if a security deposit refund was processed in Commercial Management, but the check has not been cut for the refund in Accounts Payable yet.
Compare MRI_GENLEDG (a standard MRI report) to a detailed income statement (MRI_CMPINC or MRI_STDINC – reports that use client-defined Financial Formats). Validate that the ending balance for all income and expense accounts on the General Ledger appear on the Income Statement. This validates the accuracy of your client-defined Financial Formats.
Compare MRI_GENLEDG (a standard MRI report) to a detailed balance sheet (MRI_BALST – a report that uses a client-defined Financial Format). Validate that the balance for each balance sheet account on the General Ledger appears on the Balance Sheet. Validate that Net Income from your Income Statement reconciles to Current Year Retained Earnings.
For accrual basis properties – validate the balance of the Accounts Payable account on the General Ledger against the MRI_OPENSTAT – Open Status Report. The balances should match for the period.
For accrual basis properties – validate the balance of the Accounts Receivable account on the General Ledger against the aged delinquency report. In most cases, the balances should match. Differences can arise depending on how your company handles prepaid amounts and some open credits, but you should be able to reconcile these differences.
For Commercial Management, use MRI_BLDGSUM to reconcile income amounts from CM to the General Ledger report and Income Statement. Cash Basis – use the Cash Receipt Column on MRI_BLDGSUM; Accrual Basis use the CH and NC columns on MRI_BLDGSUM.
For Accounts Payable, use either MRI_DISTLST (accrual basis) or MRI_CHKREG (sorted by account number for Cash Basis) to reconcile expense amounts from Accounts Payable to amounts on the Income Statement and General Ledger.
Use a Comparative Income Statement to compare actual numbers to budget and explain any variances for the current period and year-to-date.
Make corrections and re-run these checks as needed. Go to the source module to make corrections, re-running create journal entries to update General Ledger as needed.
Use MRI’s Bank Reconciliation program to clear items in the system and reconcile to the bank statement. The program can record charges and interest, creating the necessary journal entries. Compare the adjusted GL balance to the actual and research and explain any discrepancies. Note any items that have not cleared from previous reconciliations and take appropriate action based on your company’s policies.
Close the period and issue final financial statements. Close Commercial Management or Residential Management first (if you have both, either can be closed first, just close both before closing AP). Close Accounts Payable second. Close General Ledger last. Run final versions of financial reports as required by your client or owner.