Speeding up the headache that is the month-end close is a finance team’s dream. Fewer days spent in consolidation, forecasting, and reporting can help the FP&A team work on other projects that have been pushed off for so long. A speedy month-end close isn’t just good for finance, it’s also good for the business overall.
The month end close process is made up of tasks like account reconciliation, journal entries and financial reporting. It involves a multitude of people and technology, and as a result, organizations are challenged by inconsistent data and processes and a lack of standardization. Manual accounting processes are error prone and not sustainable in the long run, as the amount of data and work involved in the month-end close increases all the time.
The APQC’s General Accounting Open Standards Benchmark surveyed 2,300 organizations regarding the month-end close. Among these organizations, the bottom 25% said they need 10 or more calendar days to perform the month close process. The median amount of time needed was 6.4 calendar days, while the top 25% can complete a month- end close in 4.8 days or less, a huge difference between the 10+ days needed for the bottom group.
Most companies dream of reaching the coveted less-than-5-days benchmark, but rushing through the process is not the answer. Cutting down the time and resources needed without reducing the quality of the report is not only possible, but extremely beneficial for the entire organization.
1) Consolidate Data in a Single Source of Truth
One of the biggest hindrances to a fast month-end close is the fact that most organizations don’t have a single source of truth for all of their real-time data. Instead, financial data is spread in multiple enterprise resource planning (ERP) systems across various business units. When closing time comes at the end of the month, FP&A teams have to scramble to collect and consolidate all of this data.
Staying with this outdated process is time consuming and inefficient and creates a scenario where FP&A teams only have access to the consolidated and single sourced data at the end of the month-close, and not in real time.
Rather, a much better way to speed up the process, and save the finance team those critical few days per month is to have an FP&A platform that integrates with various ERP systems. This solution will pull data from the different systems on an ongoing basis which makes the FP&A system function as a single source of truth which houses all of the most up-to-date data. The finance team doesn’t have to lose time at the end of each month gathering and consolidating numbers from across the organization, and it will make it far easier to communicate the data to management as well.
2) Access to real time data
Speed and accuracy are a constant challenge for those involved in the month end close process. Whether organizations are seeking information at an accelerated pace, or it is needed due to the sheer amount of data that exists, they need to be able to trust the data they’re acting on.
Part of having a single source of truth is having access to real time data at all times, which provides far more in-depth information and promotes quick decision making.
3) Account Reconciliations
Ensuring that all sets of records are correct and in agreement is another task that can be tedious and time-consuming during the month- end close. Automation can save days of work each month in this context. Automated account reconciliations shifts the finance team from mundane accounting tasks to focusing more on the analysis of the data. Automation can greatly improve data integrity, allowing everyone in the organization to work from the same numbers.
Furthermore, automation solutions provide audit control. This protects companies both from outside data breaches and company confusion in which multiple people work on spreadsheets or data which causes confusion and different versions. Having control over the data helps ensure that mistakes and breaches occur far less frequently and reduces the chance of having to take an extra day or two for the month-end close due to a last minute mistake.
4) Organization is an important skill
It’s impossible to ignore the elements of time management, organizational skills, and teamwork communication that all play a big role in a more efficient month-end close practice. This starts with moving as many closing tasks as possible ahead of the actual month-end close. Doing this will reduce the overwhelming amount of work that typically builds up around the month-end close time. Other organizational and time saving tips include:
- Establish pre-close checklists and activities that can free up time during the close cycle.
- Establish and communicate cut-off periods to the organization’s department leaders and employees ahead of close, so that all departments are aware of when accounting will stop booking actuals and accruals will start being recorded.
- Maximize use of sub-ledgers to record detailed activity, while posting only the summarized changes to the general ledger.
The month-end close can be one of the most dreary and dragged out processes that the finance team conducts, but turning it into a systematic and efficient process can save days of work- and headaches- for the FP&A team. Using FP&A automation will standardize the data and save time on manual work, while following organizational and time management processes will make the month-end close far more efficient and help the company reach the optimal 5 day month-end close.