5 Practical Steps to Modernize Your Month-End Close Process

5 Practical Steps to Modernize Your Month-End Close Process

Maximize efficiency during the month-end close process by taking these steps to identify delays, automate processes and delegate effectively.

Month-end close can be an intensive process that, when not properly streamlined, leads to excessive overtime, stress and sometimes even strained professional relationships. If your accounting team is overextending itself during crunch time, it is likely time for a good look at—if not a complete overhaul of—your month-end close process. Step beyond the close schedule and checklists you already have and take a deeper look at what you can do to make them perform better.

Step 1: Expose inefficiencies in your month-end close process

It is easiest to spot the impacts to your month-end close while they occur. Brainstorming a quick list is helpful, but it’s also important to rally your troops this month and give them simple spreadsheets to record the start and stop times of the tasks they are working on. Have them jot down bullet points of anything that comes up that diverts or delays them.

Pro tip: Make sure to frame this process to ensure the intention is understood and the goal is known. The goal could be freeing up time for high-level analysis or easing their burdens during close. Time logging is often associated with workforce reductions, so if that is not among your goals, clear the air by addressing it upfront.

Step 2: Analyze and categorize your inefficiencies

Block time on your calendar for a high-level, 30-minute review of the logs from step one and any notes from brainstorming sessions. You can get more in-depth later, but initially you want to get an overview of the current process and determine your priorities to address the issues found in the logs.

  • Color code each diversion or delay as a recurring or isolated issue.
  • Identify issues as system, people (internal or external) or timing-related.
  • Review the log’s task durations to see how they align with your expectations. There will likely be a few surprises.

Take these findings and identify the top three to five issues that recur and impact the timeline the most. Then, share those with your team. Maintain ownership of them and delegate the remaining issues. Challenge your team to propose solutions for each issue they identify.

Learn more about Paro - the Future of Tax, Finance & Accounting.

Step 3: Redefine automation

While moving to an ERP (enterprise resource management) system may be a long-term solution you are working toward, other opportunities should not be missed in the interim.

First, set up rules to automatically code invoices, schedule auto-generated reports and create action triggers. Each rule will contribute to a more efficient month-end close process. Every system-related obstacle should be examined to see if integrations or other features are available to lessen manual work. This will promote both speed and accuracy.

Second, sharpen your timeline and create an electronic, company-wide close calendar. Complete the following:

  • Assign individuals to each task.
  • Create emails that are triggered monthly to notify team members to provide schedules, approvals or other inputs.
  • When implementing your system, obtain buy-in and commitments from each person and get confirmations that the tasks and timelines are feasible.

New challenges may be unveiled that you will want to address. Consider tweaking the sequence or timing of the activities as needed.

Pro tip: While your standard operating procedures (SOP) documents will note the positions responsible for each activity, it is important to assign individuals to be responsible when executing your plan. This adds clarity while also ensuring that coverage is provided in their absence.

Step 4: Perform one-time actions with long-term benefits

Adding new monthly activities during this evaluation is certainly not the point—performing one-time actions for ongoing benefits is, however. Look for opportunities that will enhance your operations in the long term.

For Excel-based work, invest in someone on your team who can become a power user. There is likely someone whose eyes will light up at the opportunity. Have them advance your team’s data analysis and presentation skills by learning, then sharing, how to use PowerPivot or create dashboards.

Pro tip: Online websites and specialty Youtube channels that provide continued learning opportunities are great resources if sending someone to offsite training is not a current option.

Consider your close calendar. Would establishing an earlier cut-off date for AR entries aid you in calculating commissions more timely? Could drawing a line in the sand for submitting expense reports shave off time when confirming coding of receipts?

Learn more about Paro - the Future of Tax, Finance & Accounting.

Step 5: Target month-long simplification

Addressing activities that occur between closing cycles is also an important means of supporting the month-end close process. Here are some examples of those activities:

  • Accounts payable: Accounts payable invoices can be systematized by grouping like items for data processing. If their volume isn’t an issue, then using time chunking to perform data entry, rather than interrupting data entry to respond to emails or cut checks, could be helpful.
  • Fixed-asset invoices: Scan all invoices for fixed assets to a single repository to maintain your depreciation schedules and accelerate creation of adjusting entries. Look at your chart of accounts. Do you use multiple codes for different utilities? Is there a benefit to segregating your gas and electric bills? If not, look at combining them. You can easily analyze their costs separately when filtering them by vendor.
  • Reconciliations: Account reconciliations are often an onerous—but important—process. If your team isn’t completing all expected monthly reconciliations, prioritize them by risk level and put the lesser ones on a bi-monthly or quarterly schedule. Trust that your review process during close will identify exceptions that need further analysis. Move them back to monthly review if things change.
  • Spreadsheet maintenance: If spreadsheet maintenance is challenging, transition your team to use standard protocols to help ensure their integrity. Add protection to cells with formulas (it is helpful even without using passwords), use blue text for input fields and add conditional formatting that automatically highlights values that are outside of expected parameters.

Achieve efficiency with accuracy

Making your month-end close process more efficient will provide you with more accurate, timely results. Communicate the importance of closing quickly to your team and those throughout your organization. Specify how it allows for more thorough analysis and enables management to make better decisions and comply with regulatory requirements.

While each company is unique, standardizing your processes with ongoing review, and adjusting them as needed, can yield substantial results. If you are time-strapped but could benefit from a more efficient month-end close process, Paro’s fractional controllers provide flexible guidance and oversight to meet your monthly demands.

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