7 Ways to Improve the Monthly Close Process
The ability to produce accurate, transparent, financial reports at the close of each month in a timely manner is essential to any successful business, whether those reports are distributed to external groups or used solely for internal analysis. Financial statements and monthly reports are crucial for management to understand the company’s financial health and make informed high-level decisions. The monthly close process for businesses of any size is best executed when all procedures are clearly defined and consistently followed, and clear communication and documentation are key. Faster execution of monthly close reports often presents a challenge, as you do not want to sacrifice accuracy for speed. To avoid this and ensure a better, faster month-end close process, consider our steps for improving efficiencies across the board.
Because multiple departments and employees often need to collaborate to complete the monthly close, unforeseen delays in obtaining the information needed to finalize the reports can lead to kinks in the process and late completion. While you can’t control every part of the process, you can work on nailing down all pieces for which you already have the necessary information.
While this might seem like an obvious step, many companies run into problems when they don’t set internal deadlines for each major phase of the process. By clearly laying out deadlines ahead of time on a calendar, you can avoid scrambling when holidays and other obstacles impact the timeline. Furthermore, by assigning specific people to each deadline, everyone involved in the process is more likely to be held accountable for their portion of the close.
By implementing checklists to cover each step of the monthly close and breaking the process into measurable, manageable pieces, you can increase your efficiency substantially. In addition, recording financial activity as it happens in real time will enable you to stay ahead of the curve and maintain organization as you start to prepare your month-end reports. This includes things like monthly journal entries for accrued expenses, amortization, and depreciation.
When working with a team, it is important to identify each person’s role in the reporting procedure and all real-time processes throughout the month. When staff are given clear guidelines about what is expected of them, they are more likely to take initiative and be accountable for their roles in the monthly close reporting process.
As is the case with all internal workflow processes, communication is key. Any changes in scheduling or deadlines should be relayed to all involved in the reporting process as soon as they are identified. Because different departments often work together to complete the monthly close, teamwork and consistent documentation between and within departments should always be the goal. If you foresee a portion of the monthly close being affected by something on your end, you should communicate that with all other corresponding departments as early as possible so that they can take the steps necessary to get all other pieces in place and maintain efficiency.
Written procedures and best practices should be implemented and distributed at all levels, so as to avoid confusion or ambiguity about the monthly close components. Keeping updated, clearly-written standard operating procedures for all contributors to access also ensures that all steps are followed accordingly, and no details are missed—improving accuracy and efficiency.
Take Advantage of Technology
Manual entries, reconciliations, and other reporting components should be avoided whenever possible, as implementing automatic reporting tools will save time and resources. Requesting vendors to send invoices electronically rather than by paper results in faster receipt of crucial close information and allows you to stay organized by using all electronic files.
Utilize the Process for Improvement
The beauty of compiling reports on a monthly basis is that you’re presented with the ability to monitor progress and success in 30 day increments, making it easier to see where your process is working and where it is failing. Directly following the monthly close, staff meetings should be held to immediately and clearly identify areas that can be changed or improved, or how the different working parts can collaborate more efficiently. In other words, the monthly close process should be used as an ongoing test to implement improvement methods every step of the way.
By striving to incorporate these considerations into your month-end close reporting, you can save countless hours and resources, and eliminate errors. More accurate reports, presented to those who utilize them in a timelier manner, enable faster, better-informed decisions to be made. This will assist your company in more precisely estimating its financial condition and implementing more immediate changes for success. For more information on improving your monthly close reporting process or our services, please contact us at firstname.lastname@example.org or (212) 245-5900.