INVOLVE - COMMUNICATE - AUTOMATE - SIMPLIFY - CREATE - REPORT
Month-end closings can become a burdensome, routine, seemingly unimportant, time wasting task. However, month-end closings are very essential to every business. A proper month-end close will provide timely information and should be a key indicator used to make decisions and run the business. Utilizing the following six minor attitude and behavior adjustments, processes can be improved which will significantly shorten the time it takes to do this task.
It is a common misconception that only the finance and accounting department are involved in the close process. However, a wider group within the company actually provides much of the necessary information, helps track various issues, and provides feedback needed for an accurate close.
- To make sure everyone involved in the process understands their role, you should publish a financial close calendar and communicate timelines and deliverables so everyone understands their involvement and what is expected of them.
- Also, it is recommended that you create templates to capture the necessary information along with instructions on how to use them.
- Automating month-end close procedures where possible can save time and reduce errors. The areas to explore for automation would include account reconciliations, departmental allocations, recurring calculations, recurring journal entries, and depreciation. It is also important to utilize the best technology to help with the close.
- Simplifying the chart of accounts and using clear descriptions including the purpose for which they are used can also help accomplish a simplified close. These accounts should be standardized and consistent across the entire company.
- Create a checklist of each closing activity along with timelines following the calendar mentioned earlier. This will identify month-end close procedures that can be performed in advance and procedures that may no longer be necessary. This process can also help identify potential process improvements.
- Report, track, and document all month-end issues incurred during the close and then develop solutions which are then shared with all participants.
Remember that this is a methodology, not a completed solution that will remain fixed. Change is part of the process.
Having gone through the procedure, find a way to reward those that participate and celebrate successes. A system of identifying valuable suggestions and recognizing those that made them will enhance the process greatly.
Contact your RINA team member if you need help with the redesign of your month-end close process.