Month-End Close: How to Simplify and Speed Up the Process
The month-end close process is critical to a company's financial health, not only because it ensures long-term financial integrity, but also because it lays the groundwork for finance teams to analyze numbers and identify growth opportunities. It is, nonetheless, one of the most time-consuming and tedious business processes.
The Role Forward aired an episode in which Temi Vasco, Gem's Controller, emphasized how an efficient month-end close process helps business leaders make better-informed decisions and frees up finance and accounting to focus on more forward-looking, strategic tasks.
According to Ventana Research, 62% of finance departments that complete their month-end close within six days can deliver critical, timely information to the organization. These financial departments aren't simply closing faster, they're adding real, tangible value to the company by getting critical information into the hands of decision-makers in a timely manner.
Closing faster is clearly desirable, but how can this be accomplished?
Reducing the close times from 3 weeks to as few as 5 days comes down to getting rid of desktop spreadsheets, consolidating cross-business data into a single cloud-based system, automating repetitive tasks, and implementing a finance-owned technology. Although this sounds challenging with the right financial planning and analysis (FP&A) platform, it is easier than you think.
Here’s how you can efficiently simplify and speed up the process of your month-end close.
Drop Excel and Head For the Cloud
Finance departments have long relied on desktop spreadsheets, Excel in particular. Overall, they're excellent for managing funds in small businesses. However, as a business grows, spreadsheets cause more problems than they solve.
For starters, they rely on manual input, and where there's manual input, there's always the possibility of human error. In addition, spreadsheets are frequently exchanged by email during close-outs, a practice that might lead to version control issues.
All this manual labor adds up to the drawn-out month-end close process, as CFA Robert Kugel has written: “[Companies] that are substantial users [of spreadsheets] on average take 7.7 days [for month-end close], more than one day longer than those that limit their use (6.5 days) and more than two days longer than those that rarely use them (5.5 days).”
The solution is to move away from spreadsheets and toward a Cloud Suite that collects data from multiple business systems automatically, removing errors and version control concerns.
Consolidate Data in a Single Source of Truth
Another barrier to a quick month-end close is the fact that most organizations lack a single source of truth for collecting and preserving all of their real-time data. Instead, financial data is dispersed in multiple enterprise resource planning (ERP) systems across various business units. When it's time to close the books at the end of the month, finance teams rush to collect and consolidate all of this data.
This process is time-consuming, tedious, and, as Deloitte points out, leads to an unfortunate situation where finance organizations have access to accurate data only at the end of every month and never in between.
A better way to accomplish consolidation and so speed up the month-end close is to have an FP&A platform that connects with numerous ERP systems and can take data from them on an ongoing basis. This way, the FP&A system functions as a single source of truth housing all of the most up-to-date data, and the finance team doesn’t have to lose time at the end of each month culling and consolidating numbers from across the business.
Automate Your Way to Your Fastest Month-End Close Yet
Businesses can’t start forecasting the future until they know the actuals from the prior period. The longer it takes to close the books, the staler the financial data gets, which hurts the accuracy of any forecast. Business partners are no longer satisfied with lengthy reporting cycles; they expect finance to provide faster insights. And to get faster insights you need to start by automating tedious, time-consuming tasks.
Finance and accounting departments must look for any and all ways to automate tasks during the month-end close process: This frees up their time so they may not only close faster but also participate in wider discussions about strategic business goals. These are some common ways to automate aspects of your close processes.
Emails and Reminders: The month-end close process starts just before the month actually closes, when you’re doing prep work like wrapping up outstanding vendor invoices. Close management solutions like FloQast offer a reminder feature that automates emails to vendors to ask for invoices or anything past due. Instead of manually contacting vendors and sending out templated reminders, automating the process allows you to focus on more important preparation work.
Marketing Alignment: Knowing about upcoming big one-time expenses is critical for marketing, finance, and accounting alignment. But trying to chase down updates in Slack messages, via email, or in-person can slow you down. Calendar solutions like ClickUp, CoSchedule, and Monday.com provide visibility into what the marketing team requires in terms of vendors for upcoming events or collateral for product launches and announcements. The calendar acts as a timeline for confirmations and budget expectations, which can be accounted for as you near your month-end close or estimate future closes.
Purchase Orders: Department heads are aware of the tools and systems they require to be successful, and these tools and systems can be altered or updated in the time between month-end closes. If finance and accounting miss out on conversations with department leaders over these updates, they end up with holes in the numbers. Automating purchase orders fills that gap.
Using tools like Accrualify to automate your procurement process can help you organize your accruals and accounts payable while also increasing transparency and efficiency. Accrual automation has yet to be perfected. However, these types of technologies can speed up follow-up conversations, allowing you to determine whether unexpected purchase orders are ongoing expenses that must be accrued or one-time purchases that must be noted and forecasted for the next month.
Revenue Recognition and ASC 606: Maintaining a record of revenue from product sales and services ensures that your company is on pace to meet its ARR projections. Tools like SaaSOptics automate revenue schedules through CRM integrations and sync invoices to your general ledger so you can handle revenue recognition with minimal manual input
Board Reports: Efficient month-end closes are the foundation for strong board reporting. Inaccuracies and delays in the close will derail the reporting process, hurting your standing with investors as you struggle to explain the “why” behind your numbers.
You need to know exactly where things stand to offer accurate reports to your board leaders and executive suite.
With a solution like DataRails, you can easily examine consolidated numbers from disparate sources in order to gain an understanding of the wider business picture. And when you present to the board, the solution’s single-click drill downs will allow you to confidently back up answers on the fly to the Boards’ questions, should they arise. The Board needs to know where things stand, for better or for worse, and as soon as possible. DataRails has a live embedded charts feature that presents your report, your figures, and charts update on the spot thanks to real-time, live charts.
Ensure That Finance Technology Is Finance-Owned
An often-overlooked element that impedes swift month-end closes is when finance departments are dependent on IT to help manage finance technologies. If administrative or setup changes are required, if errors arise or there are updates that need to be implemented, or there’s a bug that no one on the finance team can figure out, finance has to call on IT.
This is the opposite of agility. It slows everything down. It causes everything to slow down. And if it occurs near the end of the month, the process of closing the books is delayed.
Finance technology should ideally be simple, intuitive, and straightforward enough that finance departments can self-serve and own all aspects of it without relying on IT (or expensive outside consultants). This kind of independence makes finance faster, nimbler, and more self-reliant.
Save Time for Finance, Save Big for the Business
It is revolutionary for finance departments to use a cloud-based FP&A platform to help accelerate the month-end close process with fewer spreadsheets, consolidated data, finance-owned technology, and automation. And when finance triumphs, the rest of the company does as well.