Many organizations face challenges with timely and accurate financial reporting. While staffing shortages and outdated ERP systems are often cited as issues, they are not the only factors at play. Inefficiencies within the company's close process itself may be the root cause.

Many companies still rely on antiquated methods to manage their financial close, which can lead to delays and inaccuracies. Without the right tools or systems to streamline and automate tasks, the process becomes cumbersome and prone to errors. Moreover, a poorly structured process or inadequately trained team members can create bottlenecks and frustration. If you're encountering difficulties with your monthly accounting close, it's essential to evaluate and enhance your financial close process processes and tools to improve efficiency and accuracy.

Key Takeaways

Here are the key things you need to know about accelerating your financial close process:

• Accelerating the financial close requires planning.
• Pre-close activities are crucial for speeding up the close process.
• Automation significantly improves both the speed and accuracy of closing the books.
• Standardizing processes and procedures ensures consistency and reduces errors.
• Proper staffing and training in the accounting department are critical, and often overlooked, aspects of monthly close efficiency.

Table of Contents

• What is the financial close process?
• What makes the close process efficient?
• Five ways to improve financial close efficiency
• Expert guidance for an efficient financial close

What is the financial close process?

The monthly accounting close process is a critical financial management procedure that involves systematically finalizing and verifying a company’s financial records for a specific month. The goal is to ensure all financial activities are accurately captured and reported, providing a clear and reliable overview of the company’s financial health and performance. This guarantees that financial reports are dependable for decision-making and compliance purposes. A well-executed close process is key to accurate reporting, and adopting tools during financial systems implementations can help streamline this process.

What makes the financial close efficient?

An efficient monthly close process is characterized by several key factors:

• Organization and Planning: Clear, well-documented procedures and a detailed checklist ensure that all tasks are completed systematically. Planning ahead and setting deadlines for each step helps manage time effectively.
• Preemptive Issue Resolution: Identifying and addressing potential problems as they arise, rather than waiting until the end of the month, helps avoid bottlenecks and delays. Keeping up with bank reconciliations, accounts receivable, and accounts payable throughout the month prevents last-minute discrepancies and reduces the time required for closing.
• Automation and Technology: Using accounting software and automation tools reduces manual data entry errors and speeds up the reconciliation and reporting processes. Automated workflows streamline recurring tasks and data integration. Implementing automation in financial systems, such as during financial systems implementations or optimizations, can provide significant efficiencies.
• Standardization: Standardized processes and templates for routine tasks ensure consistency and reduce the likelihood of errors. This includes standardized procedures for data entry, reconciliation, and reporting.
• Effective Communication: Coordination between departments and team members ensures that all necessary information is gathered, and issues are addressed promptly. Regular updates and meetings help keep everyone on track.
• Continuous Improvement: Regularly reviewing and refining the close process based on feedback and performance metrics helps identify areas for improvement and adopt best practices.

The chart below illustrates the most common causes of delays in the financial close process, highlighting the importance of addressing these inefficiencies to streamline operations.

Five Ways to Improve the Financial Close Process

To optimize the month-end close and ensure timely, accurate financial reporting, it's essential to implement strategies that enhance efficiency and streamline operations. Here are five effective ways to improve month-end close efficiency:

1. Plan the Close

2. Identify Pre-Close Activities and Procedures

Not everything needs to wait until the end of the month! Schedule recurring journal entries, such as prepaid expenses and accruals, in advance. Ideally, ensure the bank reconciliation is up to date by the last day of the month. Depreciation expense should be recorded before the month ends. Finally, pre-reconcile balance sheet accounts to identify misapplied funds or balances to research. Completing many closing tasks in the last few days of the month frees up time in the new month when it's most needed. Since issues often arise during the close, it's best to avoid procrastination and handle as much as possible ahead of time.

3. Automate Time-Consuming Tasks Using Large Data Sets

Automation requires an initial time investment but can be extremely valuable for tasks involving large data sets. Automating less time-consuming or simple tasks may not be worth it, but automation can drastically reduce manual data entry, especially in complex processes, improving financial reporting & accounting. The best time to automate is between monthly close periods rather than during them. The goal is to minimize manual data entry in spreadsheets and rely on formulas for generating journal entries. Software solutions like FloQast and BlackLine are cloud-based financial close tools that cater to companies of varying complexity, providing valuable automation benefits.

Figure 1: Example of Time Spent on Financial Close Tasks – Manual vs. Automated Processes

4. Standardize Activities

Standardizing the month-end close process promotes consistency, accuracy, and efficiency. By establishing uniform procedures and templates, the department ensures that each month-end close is executed methodically, reducing the risk of errors.
Standardization also supports training and onboarding, allowing new team members to quickly adapt to established practices. Additionally, standardization encourages continuous improvement by enabling regular reviews and refinement based on performance metrics. Ultimately, this enhances financial reporting reliability and operational efficiency.

5. Ensure Proper Staffing and Training

Staffing is often overlooked but critical to the efficiency of the month-end close. Just as a sports team needs the right players in the right positions, the accounting department must be appropriately staffed for the close period. If the department is only staffed for quieter periods, it may lack the capacity to manage daily activities or focus on automation and standardization initiatives. Budget constraints may lead to hiring only senior staff, which can be costly, or relying too heavily on junior staff, which may result in longer closing times. Striking the right balance ensures the team has the right skills for the tasks at hand. Ongoing training for staff accountants enhances close efficiency by ensuring team members are up to date on accounting standards, software updates, and best practices. Well-trained accountants adapt quickly to changes and implement new processes more effectively, ultimately accelerating the close process and improving financial reporting.

Expert Guidance for an Efficient Financial Close

Navigating the complexities of the financial close process requires both expertise and operational insight. Whether you’re looking to accelerate your month-end close or refine your reporting accuracy, having a well-structured process is key. Our experienced consultants at 8020 Consulting can guide you through each step with our wide array of accounting services. Meet with an expert today today to ensure your financial close process is efficient, accurate, and sets the stage for informed decision-making throughout the year.