5 Ways to Streamline Your Accounting Month-End Close Process

insightsoftware -
July 1, 2021

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The accounting month-end close process can be stressful for the finance team in many organizations. The pressure is on to get the books closed cleanly, accurately, and without delay. That frequently means some late nights at the office (or these days, in the home office), and a good deal of research and analysis.

To streamline your month-end accounting close process, here are some best practices:

1. Set Clear Expectations Around Timing

Surprisingly few finance teams set a fixed target for the completion of their monthly financial close. But by establishing goals with respect to timing and sharing those with the entire team, managers can prompt the kind of creative thinking and aggressive prioritization necessary to move the process forward faster. When you set a firm deadline, employees are more likely to tailor their work habits to meet that goal.

Though almost everyone has heard about so-called SMART goals over the years, fewer people are familiar with the FAST model of goal-setting. FAST stands for frequently discussed, ambitious, specific, and transparent. In a team environment, using the FAST method can often have a more pronounced impact because FAST emphasizes consistent visibility of objectives and the results produced. Moreover, setting goals that seem slightly out of reach, while still attainable, challenges teams to up their game.

2. Standardize Your Accounting Close Processes

To achieve a consistently fast month-end close, finance teams must have some structured processes from which to operate. Work from an accounting close checklist. Define each task clearly and objectively. Assign accountability to each task. Develop an accounting month-end close procedures manual, but don’t make it any longer or more detailed than it needs to be.

When you break down the month-end closing process into its component parts, it then becomes much easier to examine each piece of the larger picture and look for potential areas of improvement. If reconciling accrued vacation pay is burdensome and time-consuming, finance team members might seek out ways to automate the process or perform portions of the accrual in advance of month-end.

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A standardized accounting close process becomes your team’s roadmap for closing the books each month. It begins with documenting that process step-by-step, establishing clear responsibilities. Then, as the process unfolds every month, it involves recording the necessary sign‑offs and approvals and marking tasks as complete. Working from a common accounting close checklist ensures everyone is pulling in the same direction.

3. Improve Visibility to Information

Nothing slows down the month-end closing process like having to wait for information. Whether it’s a statement balance from your largest vendor or a response from an internal department head regarding an expense accrual, waiting for answers can be one of the more frustrating aspects of your accounting month-end close procedures.

Although it may not be possible to solve that problem completely, making improvements to your reporting capabilities can improve the visibility of data across internal departments and enable you to get the information you need faster, without relying on the IT department to design or modify custom reports for the task at hand.

There is another benefit to improved visibility of information. Typically, employees throughout an organization expect that they can call upon the finance team to dig up the answers to their questions. That can be a distraction to the finance team, especially if it occurs during that critical month-end closing period. By developing a self-service model for accessing financial data for reporting and data analysis, organizations can avoid that bottleneck altogether, freeing up finance professionals to focus on a faster month-end close.

4. Automate as Much as Possible

Many of the same tools that lend themselves to better visibility of information are also well-suited for automation of month-end closing processes. Very often, account reconciliations require preparation of worksheets that incorporate data from subledgers or external sources and provide a  drill-down view that adds detail to support General Ledger balances.

Most organizations rely on spreadsheets to perform these kinds of tasks. After all, spreadsheets provide rich functionality and flexibility to perform that analysis easily. Unfortunately, there is a weak link in the chain of activity required to do this. Namely, most organizations are manually entering data from other sources into the spreadsheet to perform analysis. That creates additional work, particularly if you need to enter or import a large volume of data.

Unfortunately, those kinds of manual processes can also introduce errors and inconsistencies. If data are copied into the wrong location, if the number of rows has changed since the prior month, or if the user neglects to update a formula in their spreadsheet, it can result in erroneous numbers and additional staff time spent chasing down the discrepancy.

Spreadsheet

A better approach is to deploy tools that provide live links between your spreadsheet and source data within your ERP or other applications. This ensures accuracy and allows you to refresh your reports  so they reflect the latest information from your source systems in near real time. The result is a worksheet that is always up to date and matches the source information from your ERP.

5. Adopt a Mindset of Continuous Improvement

Finally, we always encourage finance teams to foster a “continuous improvement” mindset. As you define and document your accounting closing process and later refine it with automation and improved reporting, you should encourage brainstorming to identify potential ways to further improve the process. This mindset of continuous improvement can help you continue to raise the bar and shorten your month-end close process further.

If your organization is seeking to streamline and improve its closing processes, insightsoftware can help. We offer a wide range of best-in-class tools for reporting, budgeting, and analysis. To learn more about how insightsoftware can help you achieve your objectives, contact us to schedule a demo today.

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