Month End Close
Best Practices for a Faster Close: Modernise With FloQast
The close is one of the most critical periods in every company’s monthly (and yearly) schedule, so delays or inefficiencies can be particularly frustrating and pile pressure on accounting teams. The challenges of the close typically stem from a reliance on outdated manual processes, including the use of Excel spreadsheets to track and manage critical tasks, the late submission of reports from external providers, and a lack of visibility into the impact of delays on the overall close deadline. On top of those often-tedious processes, the complexity of the manual close also increases the potential for human error, forcing team members to spend more time remediating mistakes.
With the close taking up to eight business days per month, CFOS must understand efficiency challenges and identify opportunities to speed up and streamline close tasks for optimal performance. In this article, we will look at best practices for enhancing your close and how automated software tools can help you reduce completion times.
Defining the Close
Defining the close to get the most out of any changes you implement to your close process and the best practices you eventually apply, it’s important to understand what exactly the ‘close’ refers to.
The close means different things to different companies and to the leaders within those companies but is commonly defined as the point at which a given month’s numbers are reported to external, private stakeholders such as the board or an investor group, or reported publicly to the relevant stock exchange.
However, some companies define the close as the number of business days it takes to complete every close task before starting a new accounting period (be that monthly or the new financial year). That number should cover completing journal entries, reconciliations, variance analysis, forecast versus actual work, and required reporting to stakeholders. Other companies may consider the close complete after the general ledger lock, while others extend that to include general ledger lock and reconciliations.
Accordingly, companies should implement a system to isolate and track each component of their close process as best practice. Monitoring those components will not only help accounting teams establish and optimize the days they need to complete the close but identify those weaknesses that could be addressed with process automation.
Establishing Key Performance Indicators
Establishing key performance indicators as best practice, companies should set out predefined key performance indicators (KPI) for each segment of their close process from record to report. One of the most pertinent KPIs for close management is cycle time: the number of working days it takes from running the trial balance to completing the consolidated financial statements, including, importantly, reconciliations.
Including reconciliations in key date KPIs is so important because reconciliations serve as a company’s internal control for ensuring the fairness and accuracy of financial statement balances. Any failure to complete reconciliations promptly increases potential exposure to material errors which would, in turn, require remediation.
With that in mind, establishing a cycle time KPI ultimately enhances decision-making during the close. However, if a company’s “North Star” reporting day is unknown, it can be difficult to predict that month’s numbers ahead of time. The longer companies have to wait on incomplete data, the more challenging it is to make strategic decisions, which can be especially frustrating for CFOs, controllers, and the board. To facilitate timely decision-making, best practice dictates that companies optimize their close and record-to-report cycle – which requires a focus on enhancing the efficiency and accuracy of data collection and analysis.
Optimising Via Process Automation
Optimizing via process automation implementing close best practices means identifying opportunities to implement process automation – via close management software. Software automation not only adds procedural speed and accuracy to monthly close tasks but delivers numerous additional advantages, including greater visibility into task assignments, team bandwidth, top-level progress updates, and real-time collaboration and communication functionalities. Close software also offers companies a chance to centralize their close data, establishing a single source of truth for critical resources and files in order to enhance version control and ensure critical information does not become siloed.
You can source or develop close software tools that meet the requirements of your company’s close and address its specific inefficiencies. Platforms like FloQast Close and FloQast Reconciliation Management help companies across the industrial landscape streamline their close workflows and reduce time to completion – to find out more about optimizing your monthly close and process automation, get in touch today.
