Boy, those month-end closes happen fast. By the time I finish one month-end the next one is just around the corner. Either the calendar is continuously getting shorter or we need a way to have a more successful month-end closing process. It’s been my experience that following a few best practices can make a big improvement. Before we get to this, first let’s look at why do we need to follow a month-end schedule.
The month-end close is an important accounting function because it allows us to generate reports to measure what we’ve done and how it compares to expectations. While that information is important, it is in the past. Since we can’t change the past, we need to be able to capture that information as quickly as possible so that we can use what we've learned from the past and make good business and financial decisions going forward.
How can we shorten the time for month-end closes?
Creating a month end close checklist of what needs to happen and when is a great starting point. This same checklist can be used to assign roles for who is doing the work, as well as who will approve. By doing this, we have created a logical path to follow and identified responsibilities. Often, this list depends on other departments doing their job by notifying the accounting group of executed agreements, sales arrangements and purchase arrangements. The more integrated the systems that a company has in place, the faster and more reliable this information will be.
Why wait until the month-end to start this process?
Weekly tasks can be assigned so that instead of waiting until the end of the month, we can manage the volume of activity. Not all closing items can be managed this way, but certainly there are many that can. Block a few hours in the morning each day to knock out those activities that take up so much time at month-end. What those tasks are will be unique to your company. By dealing with those specifics in the morning, you may have an opportunity to spend time in the afternoons dealing with issues that will affect the company moving forward.
Documenting the process for the monthly close is helpful because it can help identify areas where we struggle to get certain tasks done. Do we have the right people working on this? Do we need assistance from outside the department? Is there a cloud solution that can help automate the information? By being more on top of the monthly close, we can focus on how to improve the process. Are we closing the books 2-weeks after the month-end?
How can we reduce the number of days?
With today’s technologies, there are so many cloud solutions that can help shorten the time required to complete your month-end close. Using a cloud-based accounting platform, such as Sage-Intacct, offers many opportunities to integrate directly with a third-party software to make the flow of information into your accounting system seamless. You decide what software works best for you and if there isn’t an existing integration, Sage Intacct offers an open API so that one can be developed. The goal for these integrations is to have the information updated as quickly as possible and reduce the amount of time we spend on the history and focus on the future.