While the beginning of the month can signify a fresh start for some, small businesses and their accounting departments sometimes associate the first few days of the month with the feelings of frustration, stress, and anxiety. The dreaded month-end close process never ceases, and a recent survey by software provider Floqast discovered that more than 80% of accountants describe the experience as a negative one. Fortunately, there may be a solution – or rather, many small solutions – to this problem. There are a few best practices that we at LaPorte recommend to our clients to help them streamline the month-end close process. These practices will allow you to breeze through the closing process and focus your efforts on other aspects of the business.
Develop and Document Standard Procedures
Not all procedures are created equal. In order for a business’s procedures to be effective, they must first and foremost be documented. Having documented processes gives your employee the structure they need to move quickly through a set of goals in a timely manner. A simple way to do this is to create a master checklist of duties. This checklist can detail the steps in the closing process, list who is responsible, and direct when the step needs to be completed. If everybody follows this checklist, you will be set up for success.
Continuously Improve the Process
Utilizing standard procedures does not require them to be written in stone. Month-end processes can (and should) change as the business grows, as employees come and go, and as technology is introduced. Ask your employees for help. They are the ones who do this job every month, so ask for their input on how it can be improved. They may know of an easier way to calculate a reconciling entry, or they may want the green light to explore an Excel macro that could help them with a complex calculation. As for you and the rest of the management team, work backwards. If you know how you plan to use those month-end reports, you can tell your staff how they can better provide you that information.
Cross-Train Your People
Month ends can become stressful if a key employee is out of the office unexpectedly. Don’t let an illness or an unexpected event put a halt to your process. Cross-train your employees so that the truly important steps will get done no matter what. Not only is this a good internal control measure, but it provides a fresh set of eyes that may be able to pinpoint inefficiencies and find solutions.
Automate Where Possible
It goes without saying that recurring journal entries should roll from month-to-month. But take that concept and expand it to other areas. Can you schedule a report to automatically run after a certain step is completed? Can you create a spreadsheet that you can use every month to help with an estimate? Can you invest in a software that reads PDFs or TIFs to prevent miskey errors? Don’t be afraid to test a new automation strategy. Perfecting a new automation may take a while, but if it will save you time in all future months, that time will not be wasted.
Communicate with Employees
Let the employees know just how important a speedy and accurate close is to the company. Let them know why you need those reports, who relies on them, and why receiving them timely is important. Your employees want to do their job well, and in order for them to do that, they need to know the “why” behind the assignment.
Keep Abreast of Accounting Changes
Accounting standards and tax regulations change all the time, and those changes need to be implemented into the month-end close process. Some of these changes are small and may only require a simple tweak to the process. Others are drastic and will require more time and effort to implement. When one of these more complex accounting changes comes around, keep an open mind and try to look at your process in a fresh, new light. A complete overhaul may be more efficient than adjusting your existing closing process.
When In Doubt, Ask
Our final “best practice” tip is to ask for help if you need it. Talk to other business leaders you know and see what their process looks like. Chat with industry leaders to learn about new software. And most importantly, let your accountants know if you’re struggling. Our LaPorte Accounting Services department can review your close process and can help you fine-tune it. Additionally, our industry experts will be able to provide industry-specific insight that may inform your decisions. We know that year-end close can be stressful, but if you contact us, we can help you streamline it so that it goes as smoothly as possible.