The end of the month is a time for important financial analyses and closing of the books. A successful month-end close process helps companies assess their financial position at the end of each month and ensure that all accounts are accurately reported and in accordance with regulations. It solves discrepancies and gives a fresh, clean start for the next accounting period.
A well-executed month-end close allows quick insight into current financial state and helps management make better decisions about how to plan future budgets and use resources wisely. Producing financial statements puts a great responsibility on finance teams, and the process can be very stressful and time-consuming, especially for businesses with complex financial records.
However, by adopting best practices, finance teams can make the month-end close process more manageable and less stressful. How? Keep reading, because in this blog post, we will discuss the best practices for a stress-free month-end close.
What Is the Month-End Close?
The month-end close is an important process of closing out the previous accounting period and making sure that all financial statements and records are properly reported.
It includes collecting data from various departments, analyzing and reconciling accounts, preparing journal entries, reviewing expenses, checking for accuracy of transactions and generally documenting any changes made during the closing period. It is absolutely vital that this process is done accurately and efficiently, because it sets the tone for accurate information sharing in future months.
Taking the time to properly execute month-end close helps in making informed decisions about financial health and future strategies. For many businesses, a successful month-end close process means being able to trust their financial data so that they can make better business decisions in the days ahead.
What Makes The Month-End Close Stressful?
It’s very time-sensitive
It’s those days in a month that can be incredibly stressful for anyone in the accounting department. There are so many tasks to be completed in a short period, which can lead to mistakes if the process is not managed properly.
Not only does the finance team have to manage the financial transactions that must be completed to close out the month, but often more eyes are on this process than usual. Stakeholders are interested in anything that could impact the financial performance at month-end, like expenses and incoming.
It presumes great attention to details
The consequences of errors in financial reporting can be significant, ranging from fines and penalties to damage to the company’s reputation, which adds to the overall stress of the process.
Doing this efficiently and accurately means there is less room for error, which puts a big pressure on finance teams, so it’s not uncommon for those trying to complete a month-end close to spend long hours at work making sure all numbers match up perfectly.
It involves coordinating different teams and departments
Comprehensive and accurate month-end close process requires thorough preparation and planning throughout the entire organization. A lot of coordination between different teams and departments can be challenging to manage. The pressure to meet deadlines and generate accurate financial reports also contributes to the overall stress.
Every department must collect relevant data, verify the accuracy, review any potential discrepancies, communicate potential risks to key stakeholders, reconcile accounts with outside vendors or partners if necessary, enter any necessary journal entries into the accounting system, create reports for management review, analyze available data against estimated trends and budgets, adhere to relevant regulatory guidelines when recording transactions on the books, etc.
All of these factors combined make the month-end close process a challenging and stressful time for everyone involved. It can be an intense environment, but there are common practices that can help keeping the stress under control.
Best Practices For a Stress-free Month-End Close
Approaching the month-end close process doesn’t have to be a discouraging experience. The key is to adopt a healthy, proactive attitude. Taking the time to organize yourself and your work ahead of time can help you keep calm and reduce stress levels significantly. Establish routines that cover all the details to ensure nothing slips through the cracks.
Prioritizing tasks is the best practice for an efficient and stress-free month-end close. It reduces the risk of errors and ensures that all critical tasks are completed in a timely and efficient manner.
For example, a you can prioritize reconciling bank statements and make sure that all transactions are accurately recorded before focusing on other tasks.
Establish a timeline
This is another important best practice that will allow you to keep things under control. Since the month-end process includes internal coordination with other departments, establishing a clear timeline can ensure that everyone knows what is expected of them and can plan their work accordingly. For example, you can establish a timeline that includes deadlines for reconciling bank statements, completing data entry, and generating financial reports.
Focus on details
Attention to detail is critical when you’re preparing financial statements, as even a small error can have significant consequences. If you focus on accuracy, you can reduce the risk of errors and make the month-end close process more manageable. For example, team members can review each other’s work and provide feedback to ensure that the data is accurate.
Standardize the process
Standardization makes the process streamlined, consistent, efficient, and manageable.
For example, you can develop a standardized checklist or template for the month-end close process, outlining the tasks that need to be completed and the timelines for each task. That way everyone will be aware of what needs to be done and when, reducing the risk of missed deadlines or incomplete work. Standardization can also help to identify areas for potential improvements.
Ditch the manual work
Manual work is what makes you slow and prone to errors. There are many software solutions that can deliberate you from manual month-end processing and automate mundane tasks like entering journal entries into the accounting system or generating reporting documents for management review. Also, automated software solutions can help reduce errors associated with manual entry by ensuring accuracy across multiple sources of data within an organization’s network.
Technology can be a powerful tool for making the month-end close process more efficient and stress-free. For example, you can use project management software to coordinate tasks and deadlines among the teams, and a cloud-based accounting software to automate many of the tasks involved in the month-end close process. Automation can help you with reconciling accounts, generating reports, and ensuring compliance with regulatory requirements.
By using technology wisely and selecting the right solutions for company’s needs, you can make the month-end close process faster and with way less stress.
Learn from your mistakes
Finally, the best practice to reduce month-end close stress is to learn from previous mistakes. No matter how well the process is managed, mistakes and errors can still occur. By analyzing mistakes and identifying areas for improvement, you can continually improve the process and have better confidence next time around.
For example, if a mistake was caused by a lack of communication between team members, you can implement new procedures to improve communication. Or in other example, if a mistake was caused by a lack of training or experience, maybe the finance team needs additional training or support to help develop the skills and knowledge they need to complete their tasks more effectively.
Remember that the month-end close is a continuous process and constant improvement is what makes it easier.