As an accountant, each month, you must close the books for your company. This process can either be a smooth and seamless one, or it can be a bumpy, winding road fraught with headaches. Which reality you face largely depends on how efficient your month-end close processes are. No matter how frustrating inefficient month-end close processes are to your accounting team, their ramifications go much deeper. Spending longer than you should on the month-end closing process is also a costly waste of resources for the business.
Top Five Warning Signs You Must Improve Month-End Closing Process
Duplicate Data Entry and Manual Work Are the Name of Your Month-End Close Game
If you run your business with multiple systems like e-commerce, CRM, time and billing and point-of-sale, and those are not connected back to your accounting system, your accounting team has to reenter key information. This is not only time-consuming, but also error-prone and a poor use of precious accounting resources. And what’s worse is data in each system rarely matches on the first try. So, your accounting team must spend additional time tracking down the errors in trying to reconcile the systems so that they can create accurate reports.
Lack of a Standardized Month- End Close Process
Ideally, the month-end close process should be the same from month to month. But when you have inefficient month-end close processes, each month brings with it a new set of challenges. Ask yourself this? “Do I have a standardized, documented month-end process to follow step-by-step? If the answer is yes, is it somewhere that is easily accessible? Or do you struggle each month to find or determine which is the latest version of the file? Unless your documented month-end process is difficult to find, it can’t do its job. When it fails, frustration mounts, time is lost and the likelihood that your staff will use the unapproved workarounds instead increases.
Delayed Financial Reporting
How long after the month are your company’s financial statements ready for prime time? If the answer is longer than you would like, this is a key sign your company could stand to improve month-end closing process. When using disconnected systems that rely on duplicate data entry, creating financial reports takes time. But when your financial statements are so far delayed, you can barely see the period they cover in your rearview mirror, the value of the insight they deliver is diminished. After all, when businesses can see trends in real-time and adjust quickly, they are much more competitive than those who can’t react to changing trends until months later.
Incomplete or Incorrect Transaction Entries
We touched on this earlier, that duplicate data entry opens you up to a much higher risk of incorrect data than there would be if your systems automatically talked to one another. But considering the havoc even minor errors can wreak, it’s a point that bears being expanded upon. Un-caught they ruin the truthfulness of your financial statements, leaving you to make business decisions on false assumptions. However, even if you catch these errors, as most accounting departments would during the reconciliation process, tracking down the source of the error and then correcting it is a very time-consuming and tedious process. One that delays the availability of your financial statements and unnecessarily chews through your accounting staff’s work week.
Limited Insight from Your Financial Statements and Reports
If your accounting system’s included reporting tools meet GAAP requirements, that may seem like enough. But ask yourself this, “do they give business leaders the information they need to make smart decisions? If the answer is no, or you are unsure, now is the time to improve the month-end closing process.
As a stopgap measure, many companies use spreadsheets or other external reporting tools to build upon their financial statements to deliver the type of insights their management team needs. But again, the solution requires duplicate data entry and puts a heavy burden on your accounting team, one a different accounting system with more robust reporting could better shoulder.
These are just a few of the symptoms which signal its time to improve your month-end closing process. If you’d like to learn more about these and others,
If after reading the e-book you are interested in learning more about Acumatica cloud ERP and what sets it apart from other accounting solutions,