Avoiding the Monthly Financial Close Time Crunch

I see a common theme among my clients’ accounting departments. There is a frantic time crunch during the first week of the month to close out the previous month’s financials. This not only creates stress and frustration, it also creates staffing issues. Many accounting departments are faced with the dilemma of either being adequately staffed at the beginning of the month and overstaffed at the end of the month, or being understaffed at the beginning of the month and adequately staffed at the end of the month. Either scenario has definitive drawbacks including staffing budget balance, inability to meet timelines, employee exhaustion/boredom, etc.

The key to avoiding this dilemma is reevaluating your monthly close process to identify opportunities to reduce/automate closing tasks and spread the remaining tasks more evenly throughout the month. The subsequent paragraphs describe methods for achieving a more efficient and steady close process.

Step 1:  Identify the critical path:

Creating a timeline to determine task dependencies and identify those that directly impact the completion date of close will allow you to focus on the most critical tasks for improvement. It is likely that you will find that there are few significant tasks that are on the critical path; these are the ones to target first.

 Step 2:  Reduce or eliminate manual processes and the use of Excel

A majority of the effort spent during the close process is manually consolidating data from multiple sources, manipulating the data in a spreadsheet, and then uploading them to your accounting software. Leveraging accounting and IT expertise to automate data flow between systems and data manipulation can have a huge payoff when it comes to reducing the staff hours required for close.

Step 3:  Operate in Real Time and reduce month end journal entries

Many accounting departments have transactions that they wait to book until the end of the month. It may seem more efficient to bundle entries and only perform a task once a month, but this often adds to the already existing time crunch instead of being spread out during the slower weeks of the month. Especially if questions arise around certain transactions and research is required. It is a lot easier to inquire about a transaction a day or so after it happens than almost a month later.

 CONCLUSION:

The implementation of changes to the monthly financial close process can yield significant results. It is not an easy undertaking and can provide many challenges along the way, especially for an already overworked accounting staff. Engaging your outside accounting professionals can relieve some of this burden by providing you with talented people, deep expertise and knowledge of best practices.