Many companies assume they have an efficient month-end close process, accepting long hours and high pressure as par for the course. Luckily, they’re mistaken.
Recently I was speaking to a friend of mine about his decision to go to college to become an accountant. The answer he gave me was the one I think many accountants would agree with – we have an uncanny love for numbers and logic, and an appreciation for business processes, analytics and – of course – financial spreadsheets.
However, it was his follow-up comments that threw me for a loop. He told me about the universal fear of accountants about the time, effort, and frustrations of the month-end close process. In other words, did I realize that most have to work long hours for days at a time, working nights and weekends to complete the month-end close? I vaguely remember talking about how long that process took. However, nothing could have prepared me for what it really entailed until I experienced it.
“It’s not just about closing the books faster – it’s about making the entire process more efficient.”
Given that I’ve experienced all kinds of accounting situations with all types of companies, I was able to take a step back and put the challenges of the month-end close process into perspective. Rather than focusing on how treacherous those monthly processes were, I decided to find ways of making them better. This comprised making the processes not only faster, but also more efficient.
My friend and colleague was the CFO of a manufacturing company, for example, and he found and recommended a new ERP system for the company that made these processes faster and easier. He had found a better way of getting things done.
That was 20 years ago.
Since that experience, he segued into a different role as a consultant with the goal of helping other companies achieve these efficiencies. What he witnessed since that time gave him quite a bit of insight, and some of the things he experienced were not only surprising, but downright perplexing. For example, many companies he worked with had painfully long monthly close-to-report cycles, even those that were using month-end close software!
Processes that should have taken only a few days with 2-3 people were taking weeks with an army of accountants. It was obvious to management that they had a problem – their people were being overworked, they were being taken away from other critical responsibilities, and management had no idea what their financial results were until the third week of the following month.
These types of situations are easy for management and accounting directors to identify with because they know that these monthly processes are just taking way too long. Other companies are still able to get their month-end tasks done within a 4-day timeframe, and they are more than content with that. But that contentment may hide other inefficiencies in the process.
Consider this – for many companies, getting the close-to-report process done in 4 days may still entail that army of accountants, still working 12+ hours per day, potentially borrowing other personnel from other departments, or even hiring temporary help every month to get the process done. Despite best intentions, you are still left with:
- Overtaxing your accounting and finance personnel every month, potentially leading to burnout and turnover.
- Turnover will inevitably lead to increased training costs for new staff.
- Additional overtime expenses for the accounting staff.
- Additional expenses for temporary help.
- Increased risk for errors or irregularities.
The opportunity cost of taking personnel away from other important tasks.
In the end, despite the fact you may be finishing your monthly processes within a reasonable amount of time, the additional costs due to inefficiencies, errors and turnover may end up negating entirely your efforts to accelerate the process.
Research from PwC reinforces this reality in looking at the time finance teams spend on tasks that are easily automated or, even worse, are simply wasted efforts. In reporting alone, these inefficiencies can account for more than of 40% of a finance team’s activities.
In order to avoid these pitfalls, it is important to use unified, automated financial close management software that can minimize these costs and inefficiencies. You’ll want a solution that automates manual work and manages the entire financial close cycle, from closing the books to consolidations and reporting – not just point solutions for tasks such as account reconciliations and journal entries.
Your employees will be able to focus their efforts on other critical tasks, including more dynamic reporting, financial analysis and improving efficiencies in other areas. Not only will your employees thank you, so will your managers. Remember, the key to an efficient, streamlined process is not just about getting the books closed and the reports distributed on time – it is also about how you get there.