A recent survey conducted by Sage found that 93% of financial leaders are under pressure to accelerate month-end close. Finance teams everywhere are feeling the pressures to “close faster” and are looking for ways to shorten the average month-end close cycle from the average of 10-12 days.
Monthly close is an important task performed by the finance team where financial information is collected and made available to be analyzed by leaders and other stakeholders. The result of the data collected may produce cash flow statements, fixed assets and inventory levels, Income and Expense Reports, Balance Sheets, and a variety of other reports which help provide visibility into the financial health of the company and are used for important decision making.
An accurate and streamlined month-end closing process leads to fewer errors, better allocation of resources, and most importantly, information being routed to leaders for planning.
So how can finance and accounting teams “close faster” and better?
Tackling The Challenges of Month-End Closing
Month-end close is often dreaded by many accounting and finance professionals. Collecting the information needed to “close the books” every month is a data-intensive task.
This is compounded by the fact that not all information needed can come directly from the accounting team and must be collected by multiple business units and systems. Financial data comes from several disparate data sources. Finance managers must often create multiple spreadsheets to manage labor-intensive data cleansing, which slows down the process and increases the risk of outdated information and errors.
Most accounting teams not using an enterprise ERP are likely managing things like Fixed Assets, bank account reconciliations, deferred revenues, inventory, and pre-paid expenses outside of the accounting system (off-ledger). This means a lot of duplicate data entry, files, and manual lookup is needed to close the books and produce accurate reports.
Outdated or inaccurate information and reports directly affect your leader’s ability to make effective business decisions, making it very risky to rely on disparate data sources.
Tips for Best Practices Month-End Closing
#1: Start with a list!
Having a checklist is a good place to start as it streamlines the workload and ensures governance in information collection. Remember that a checklist is simply a tool to provide guidance and may need to be continually revised and updated to reflect changes to the business.
Your month-end checklist should include instructions for things like:
- Gathering bank statements
- Gathering necessary data from business leaders
- Reconciling sub-ledgers for auditors
- Calculating depreciation
- Recognizing deferred revenue and prepaid expenses
- Completing general month-end journal entries
- Consolidating inventory data
- Producing the correct financial statements
Efficiencies in this process matter as every hour saved means teams are more likely to meet or exceed the month-end closing deadline. Leadership depends on timely monthly reports and must be made aware if there are delays expected in the closing or reporting process.
#2: Delegate and Communicate
Communicate early and often with your team and leadership and make sure timelines are on track, or any delays are known.
Also, ensure everyone outside the finance team is aware of the timeline and expectations on their part. Building a relationship with other teams within your organization and providing clear goals and objectives required to complete the month-end process is part of the finance team’s responsibility. Often, finance leaders will host monthly or quarterly pre-close meetings to review the objectives and ensure timelines can be met.
This eBook offers more insights on how to manage your month-end process.
#3: Facilitate Month-End Close with Automation & Technology
With month-end close deadlines shortening, and teams stretched, the days of spreadsheet-based month-end close are numbered. Modern accounting teams leverage technology and automation to eliminate manual accounting tasks and deliver timely data and reports throughout the entire accounting cycle.
By leveraging a complete cloud-ERP solution with integration and automation, manual work is eliminated and key accounting data points are kept up-to-date and available for reporting.
Leveraging technology to collect, sort, and calculate data reduces the risk of human error and facilitates the month-end closing. For example, technology improves how payables are posted and tracked all month long. When invoices are captured electronically, they are automatically coded, routed and approved, eliminating the need to collect that data at month-end. Another key way technology augments the month-end close process is through online data collection and reporting. When data from multiple systems and teams is fed into a central location, it is much easier to get one version of truth to use for decision-making.
There is no limit to the efficiencies that can be created with technology. Imagine being able to auto-post pre-paid expenses and recognize revenues automatically based on specific parameters and profiles. Technology allows you to automate the bank reconciliation process by importing bank statements directly into your ERP and can cut approvals in half with routing. Modern ERP solutions even offer real-time dashboards so leaders aren’t knocking on your door at month-end. If you are relying on a manual process for month-end close, or the technology you rely on is not robust enough to handle end-to-end financial management, it is worth investing in the right solution to facilitate accounting processes. Most organizations should expect to see considerable returns on the investment through time savings, a reduction in accounting and data errors, and improved insight.
Close Faster, Report Better
Quisitive is your trusted partner for complete digital transformation, including helping you leverage proven and scalable cloud accounting and ERP solutions to streamline key accounting processes and use your data for decision-making.
Book your free ERP assessment with us and we’ll assess your needs and recommend the best solution and path for success.