Is Month-End A Struggle For You?
Accounting is one of the key functions of running a successful business or organization. From the basic bookkeeping to the financial reporting, it takes a solid and skilled team to bring it all together. Producing accurate and timely financial statements is one of the main tasks entrusted to finance managers and Chief Financial Officers.
I have worked for quite a few different companies during my accounting career and one area that I see accounting leaders struggle the most with is closing the books timely. Many of the Not-for-Profit organizations I have consulted for were faced with this challenge.
While most aim to close on a monthly basis, others try to do it at least quarterly. Measuring performance will be difficult without accurate and timely reporting. The numbers are the key indicators and tools for decision making.
So what are some of the constraints or hindrances to achieving a smooth monthly close? Well, it’s all about structure and processes. In order to achieve the desired outcome, it is important to implement sound operating procedures.
This begins with hiring a solid team to execute these procedures as designed. Developing workflow systems and ensuring that team members have clear guidance on executing them will facilitate achieving the department goals.
- First, develop a checklist, ensuring that all of the key components needed are included.
- Set a realistic timeline for each step of the process and what it would take to complete it.
- Document the operating procedures so staff/team members have a guide to follow.
- Solicit feedback from your team in order to make improvements where necessary.
- Implement metrics to test or indicate any weakness in the procedures.
- Schedule a few sessions for a soft close, leaving room for smoothing, then hard close.
Achieving a successful close may take some time but each cycle should yield results as to what works well and what needs to be improved. It requires team collaboration with leaders being open to feedback and suggestions from those who are directly tasked with a specific process.
Finance leaders do better when the team members or direct reports know or feel like their contributions to the process are valued.
Three Issues Commonly Encountered
- Systems – Computerized accounting systems are never “one size fits all.” Some are designed for specific industries. For example, not-for-profit organizations that are heavily grant funded, may require a system to track revenue by sources or different funds.
- Integration – Reports, information and supporting documents (receipts, etc) from others inside as well as outside of the organization is a huge part of accounting. Aligning systems that integrate well with each other will facilitate a successful monthly close. For example, the payroll systems or the banking portal integrated with the general ledger makes analysis and reporting much easier.
- Staffing – Having a solid team in place to execute the key functions within an accounting department is so very important. Quite often, there is either an issue with under-staffing or in-adequate staffing. When the skill level required to perform specific roles is lacking, this negatively impacts the overall results.
Closing the books involves the culmination of the monthly accounting cycle to produce financial reports. The team should all have worked together throughout the month to record, analyze and reconcile transactions. It is absolutely imperative that the numbers are reliable as they will be valuable to key decision makers. In order for these financial reports to be useful, they should also be prepared and delivered timely.
Key Financial Reports
- Income Statement or Profit & Loss Report – This report is used to report the monthly income, expenses and shows the result of net profit or net loss
- Balance Sheet or Statement of Financial Position – Reports the assets, liabilities and owner’s/shareholder’s equity at a particular period of time.
- Cash Flow Statement – Reports inflows and outflows of cash from operating, investing and financing activities.
Closing the books monthly does not have to be an impossible task when the right structure is put in place. A great tool when implemented correctly, is a financial closing calendar.
What’s done from the beginning of the month, leading up to the last few days in the month, should focus on meeting the deadline.
To reiterate, set realistic goals for the team with clear directives they can follow in order to achieve the desired outcome. Make month-end closing a major event and you may even add some exciting incentives to motivate your team.
Do you need help with implementing a monthly close system or some guidance to streamline your current process? Beginning with establishing policies and procedures, training the team on the new procedures, then testing for efficiency, a successful monthly close can be achieved.
Working with accountants, analysts and finance leaders across several companies over the years, I have the expertise to make what seemed impossible an actual reality. Nothing makes a CFO happier at month end than the ability to deliver accurate financial reports, timely.
For further assistance with your monthly close or for Accounting & Tax services, please visit us @ https://slsaccountingsvcs.com/contact/
Also, if you’ve enjoyed reading this or you have found value in this article, please leave me a comment and share your feedback. I always appreciate hearing from my readers.