How Much of the Monthly Close Can Be Outsourced? Practical Scope for Foreign-Owned Companies in Japan

“The monthly close for our Japanese entity takes too long.”
“We cannot submit the Reporting Package required by global headquarters by the closing deadline.”
“Our monthly close became difficult to maintain after the accounting staff member responsible for it left.”

For foreign-owned companies facing these challenges, outsourcing the monthly close can be an effective option.

The monthly close involves much more than simply posting journal entries. It consists of multiple processes, including account reconciliations, closing adjustments, reviews, preparation of the trial balance, and reporting to global headquarters.

Some of these activities can be readily outsourced, while others involve judgments or approvals that should remain within the company.

This article explains how much of the monthly close can be outsourced by foreign-owned companies in Japan, which responsibilities should remain in-house, and the key points to consider when implementing an outsourced monthly close process.

What Is Monthly Close Outsourcing?

Monthly close outsourcing means engaging an external professional service provider to perform some or all of the accounting and closing activities carried out each month.

For example, a company may outsource an end-to-end process covering routine bookkeeping, month-end balance reconciliations, closing adjustments, preparation of the trial balance, and reporting to global headquarters.

For foreign-owned companies in particular, the monthly close often involves not only preparing the Japanese entity’s accounting books and trial balance, but also submitting monthly financial information to overseas headquarters.

For this reason, it is important to design “preparing the Japanese entity’s books” and “reporting financial figures to global headquarters” as one integrated monthly close process rather than treating them as separate activities.

How Much of the Monthly Close Can Be Outsourced?

The following table summarizes typical monthly close activities and the general approach to outsourcing them.

As shown above, a substantial portion of the monthly close can be outsourced.

However, “can be outsourced” means that the operational work can be delegated to an external provider. It does not mean that decisions the company itself should make—such as determining accounting policies, making management judgments on significant transactions, or providing final approval—can also be transferred externally.

Accordingly, when outsourcing the monthly close, it is important to clearly distinguish between accounting operations that can be delegated and judgments or approvals that should remain within the company.

Monthly Close “Review” Can Also Be Outsourced

If bookkeeping is already performed internally by the Japanese entity or by an overseas Shared Service Center (SSC), a company may choose to outsource only the review of monthly close data rather than the data entry itself.

For example, the monthly review may include checking whether:

• Bank balances agree with the accounting records
• There are any long-outstanding accounts receivable or accounts payable balances
• Prepaid expenses, accrued expenses, and similar items have been recorded appropriately
• Fixed asset and depreciation entries are complete
• Significant changes compared with the previous month or budget can be reasonably explained

This type of review goes beyond simply confirming whether the numbers add up.

It involves examining the substance of account balances and the reasons for movements from the previous month, and requesting correcting entries or additional supporting documentation where necessary.

For foreign-owned companies, one possible model is for accounting data entered by an overseas SSC or Finance Team to be reviewed each month by personnel who understand Japanese accounting and tax practices.

Four Key Points to Consider in the Monthly Close for Foreign-Owned Companies

1. The Closing Schedule of Global Headquarters

Foreign-owned companies may follow a group-wide Closing Calendar rather than a schedule determined solely by the Japanese entity.

For example, if the Reporting Package must be submitted to headquarters by the fifth business day of each month, the Japanese entity must complete invoice collection, AR and AP finalization, bank reconciliations, closing adjustments, and reviews before that deadline.

Therefore, when outsourcing the monthly close, it is important not only to decide “by what date the trial balance should be completed,” but also to work backward from the final submission deadline to global headquarters and set deadlines for each individual task accordingly.

The timing for providing required documents and data to the outsourcing provider must also be clearly defined. Even if the external provider can process information quickly, the monthly close cannot be accelerated if the necessary information is not provided internally on time.

2. Differences Between Japanese Books and Group Reporting

The accounting books of the Japanese entity and the figures required for Group Reporting by global headquarters may not always be identical.

For example, Mapping to the Chart of Accounts specified by headquarters may be required.

If the group applies IFRS or US GAAP, additional accounting treatments or adjustments that differ from the Japanese entity’s local books may also be required for headquarters reporting purposes.

Therefore, when outsourcing the monthly close, it is necessary to clarify whether the scope ends with:

preparing the Japanese entity’s monthly Trial Balance

or whether it also includes:

making the adjustments required by global headquarters and completing the Reporting Package

If the distinction is not made clear before the work begins, additional tasks are likely to arise after the monthly close has otherwise been completed.

3. Intercompany Transactions

For foreign-owned companies with significant transactions with parent companies or overseas affiliates, discrepancies in Intercompany balances can delay the monthly close.

For example, differences may arise because:

• The Japanese entity records the transaction in the current month, while the overseas entity records it in the following month
• The two entities use different foreign exchange rates
• One entity has issued an invoice while the counterparty has not yet recorded it
• The two entities use different accounts for the related expense or revenue

If these differences are not identified until month-end, there may not be enough time to resolve them before the reporting deadline to headquarters.

It is therefore important to decide in advance when Intercompany balances will be reconciled, with whom, and using which supporting documents.

Where appropriate, it can also be helpful to clearly identify the relevant contact persons and Escalation points at overseas affiliates so that discrepancies can be resolved more efficiently.

4. Japan-Specific Accounting and Tax Practices

If transactions are processed only according to the accounting rules of global headquarters, requirements applicable to the Japanese entity may be overlooked.

For example, Japanese entities have statutory obligations to retain accounting books and transaction-related documents. The required retention method and period may vary depending on the type of document, transaction format, and circumstances of the fiscal year.

In addition, accounting services such as bookkeeping should be distinguished from professional tax services in Japan.

Certain services, including tax representation, preparation of tax documents, and tax consultation, are handled by licensed tax accountants or tax accountant corporations under the Certified Public Tax Accountant Act.

At the same time, day-to-day accounting and taxation are closely connected.

For example, tax-related review may be required during the monthly close for matters such as:

• Consumption tax classification when posting journal entries
• Withholding tax on overseas payments
• Tax treatment of fixed assets
• Tax treatment of specific expenses

For this reason, when outsourcing the monthly close, it is important to confirm whether the service structure allows appropriate tax professionals, such as licensed tax accountants or tax accountant corporations, to be consulted when tax analysis is required, and whether the outcome of that review can be properly reflected in the accounting treatment.

Benefits of Outsourcing the Monthly Close

It Can Help Accelerate the Monthly Close

By clearly defining responsible parties, required documentation, deadlines, and review procedures, and by following the same process each month, the monthly close becomes easier to standardize.

In particular, outsourcing can provide an opportunity to review practices such as:

“We do not start processing until every invoice has been received.”

“Only one person knows which documents are required.”

“We do not investigate balance discrepancies until the end of the month.”

Accelerating the monthly close depends not only on outsourcing itself, but more importantly on organizing workflows and clearly defining the closing schedule.

It Can Reduce Dependence on Individual Accounting Staff

If only one accounting employee understands the procedures and judgment criteria for the monthly close, that person’s resignation or extended absence could cause the process to stop.

When outsourcing is introduced, documenting processing rules, required documentation, responsible parties, deadlines, and review procedures can reduce dependence on specific individuals.

It is also important to confirm that the outsourcing provider has multiple team members who understand the account rather than relying on a single person.

Finance Managers Can Focus More on Analysis

Finance Managers and CFOs may spend significant time each month reviewing journal entries, performing bank reconciliations, and checking accounts receivable and accounts payable.

By outsourcing routine monthly close work, they can devote more time to activities requiring analysis and judgment, such as:

• Budget management
• Forecasting
• Performance analysis
• Cash Flow management
• Explanations to global headquarters
• Reporting to management

How to Avoid Problems When Outsourcing the Monthly Close

Successful monthly close outsourcing depends not only on which tasks are outsourced, but also on clearly defining who is responsible for each part of the process.

Before implementation, companies should clarify at least the following:

• Monthly Closing Calendar
• Required documents and submission deadlines
• Responsibilities of the Japanese entity, global headquarters, and the outsourcing provider
• Preparers, reviewers, and approvers of journal entries
• How Accounting Policies and historical accounting treatments will be shared
• Submission deadline for the headquarters Reporting Package
• Communication procedures for exception transactions or unclear items
• Escalation points when tax review is required

One approach that should be avoided is simply asking a provider to “handle the monthly close” without defining the process in more detail.

For example, when an invoice has not yet been received, the appropriate response depends on who is responsible for following up with the Vendor, whether an Accrual should be recorded for the missing invoice, and who has authority to approve the amount.

A sustainable monthly close process requires clear ownership for invoice collection, accounting treatment decisions, review, and final approval.

What Types of Companies Are Well Suited to Monthly Close Outsourcing?

Monthly close outsourcing may be worth considering for foreign-owned companies in situations such as the following:

• The Japanese entity has been established but has not yet hired a dedicated accounting employee
• The monthly close is concentrated in the hands of a single accounting employee
• The company wants to rebuild the monthly close process following the resignation or leave of a key employee
• Global headquarters is requesting a faster monthly close
• It is difficult to recruit personnel who have both Japanese accounting expertise and English-language skills
• The company wants to outsource preparation of the headquarters Reporting Package as well
• The company wants to free the Finance Manager from routine accounting work
• Accounting data prepared by an overseas SSC needs to be reviewed from a Japan perspective

On the other hand, outsourcing every aspect of the monthly close may not be appropriate for companies that have a large number of complex transactions requiring accounting judgment each month, or where accounting treatment is closely linked to management decisions.

In such cases, one option is to outsource routine tasks such as bookkeeping and balance reconciliations while retaining complex accounting judgments and final review internally.

Conclusion: Outsource the Monthly Close as a “Process,” Not Just a Set of Tasks

A wide range of monthly close activities can be outsourced, including journal entries, balance reconciliations, closing adjustments, reviews, preparation of the Trial Balance, and reporting to global headquarters.

For foreign-owned companies in Japan, the process must also take into account the Closing Calendar of global headquarters, the group Chart of Accounts, Reporting Packages, Intercompany transactions, group accounting policies, and communication in English.

For this reason, the key is not simply to outsource individual monthly close tasks, but to determine whether the entire process—from day-to-day accounting in the Japanese entity through the monthly close and Reporting to global headquarters—can be designed as one integrated workflow.

At the same time, companies do not need to outsource everything. By appropriately separating operational tasks, accounting judgments, tax reviews, and final approvals, companies can reduce their internal workload while maintaining appropriate internal controls.

RSM Shiodome Partners supports the Japanese entities of foreign-owned companies with accounting outsourcing services, including day-to-day accounting, monthly and annual closing, and reporting to global headquarters, as well as tax and other back-office services.

If your monthly close depends heavily on a particular employee, if reporting to global headquarters takes too much time, or if it is difficult to determine which activities should be outsourced, a useful first step is to map the current monthly close process, clarify the respective roles of the Japanese entity, global headquarters, and the outsourcing provider, and then determine the appropriate outsourcing scope.

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