4 Best Practices for a Better Month-End Close in the New Year
Jan 02, 2019 | By John Siegel
Accountants have differing opinions on a wide variety of issues, but the month-end close isn’t one of them. 82 percent of accountants describe the month-end close as a negative experience. This number is staggering — and sad, since the month-end close is a fundamental job for accountants. Let’s look at why the financial close is so cumbersome for accountants and four great ways to make the process less daunting.
Why the Month-End Close is So Painful
Due to clunky communication processes, most organizations suffer from lack of transparency and poor documentation. This problem happens naturally as organizations grow, which is why it’s so common. As a result, team members typically have visibility only into their small piece of the close.
This is often complicated by the fact that documents are shared haphazardly across a disorganized local network drive. Procedures aren’t documented, and because everyone is so busy, no one is sure who needs what information anyway.
For most accountants, the close means long, hard hours in the office and frequent restatements. As a result, many accountants report increased stress during the close — to the point where one-third state that the month-end close impacts their personal relationships.
Best Practices to Reduce Stress
Given how negatively a month-end close process can impact employees, it’s a small wonder that it can be completely overhauled if organizations implement just four best practices.
Use a Collaborative Month-End Close Checklist
A close checklist that tracks employees’ responsibilities and their progress will keep everyone aware of how their work fits into the bigger picture. Each team member will know when their work needs to be completed and offer leaders insight into potential bottlenecks.
It didn’t take long for Stack Overflow, an online community that offers developers training and networking opportunities, to see the value in this kind of checklist. Headquartered in New York City, the company went from a soft-close system without a detailed close checklist to using a more formalized close process. The new process included clear-cut procedures, controls, and timelines, allowing them to make the close easier to manage, with dramatically increased transparency and accountability. As a result, time to close has been cut by more than half, from 22 days to 10.
Standardize Reconciliation Templates and Folder Structure
Speed up reconciliations, review, training, and auditor PBC requests by using a standardized reconciliation template. (Download our free best practice account reconciliation templates here.) This offers team members a way to plug their work into a template and avoid redundancies. Ensure that anyone in the organization can locate documents quickly and easily by establishing a consistent folder structure.
Reevaluate Your Talent Mix
With technology becoming more foundational to accounting and finance processes, you need people on your team who can use technology to its fullest potential. Consider hiring tech-savvy accountants who might not possess the traditional pedigree a GAAP expert CPA might.
Take Advantage of Cloud Accounting Technology
Using a cloud platform will make the close process less stressful and more efficient. Teams can access documents more quickly while working on documents simultaneously. This will create a level of transparency while eliminating the age-old problem of not being able to access a document when its owner is out of the office or leaves the organization.
Get started is as easy as creating a shared Microsoft Excel checklist in SharePoint or OneDrive, and rolling it forward each month. Even better than relying on Excel alone, which has limitations when it comes to workflow, is to use a close management software solution to track all checklist items, reconciliations, and review notes. RevLocal, a digital marketing company serving the U.S. and Canada, used to rely on an antiquated binder system and desktop-based Excel spreadsheets to manage the month-end close. When they switched to FloQast, they incorporated their Excel spreadsheets into our close management software, which keeps them in the cloud and always up-to-date.
Life is Better with a Streamlined Close Process
A more efficient close process has benefits to your business, as well as to your team members. On average, teams using technology to streamline their month-end process typically shave three days off their close. Accounting and finance leaders that take advantage of cloud technology have better insight into the close process, are more confident in the close, manage less-stressed employees, and onboard new hires faster.