The monthly close—it’s one of those processes that is time-consuming, inaccurate, and somewhat tense. But how much is it costing you, and how much is it standing between your business leaders and the visibility they want?
According to analysts and experts in the finance world APQC, companies able to cut down on the monthly close process are able to spend more time focused on providing finance expertise to organizational initiatives and decisions. However, not every organization has the same success in cutting down the time spent on these processes.
When asked how many calendar days it takes between running the trial balance and completing the consolidated financial statements, some companies boasted a comfortable 4.8 days. Others took a calendar week. Others still took a grand total of ten calendar days to finish the job.
Overcoming the Challenges: Five Reasons You’re Not a Top Performer
A top priority for finance leaders from the C-suite to the controllers office, there are many good reasons to close the books on time—but despite the hopes, few are taking the steps needed to improve.
That’s why we’re looking at five reasons that the monthly close process is being held back and inviting you to learn more from a recent FloQast whitepaper on improving the monthly close.
Something you already knew was atop the list of challenges faced by firms, manual processes have continued to be a roadblock between companies and their close goals. As discussed by APQC, the biggest barrier between firms and a faster close is data quality.
Few things contribute more to poor-quality data than inaccurate and disconnected manual processes. FloQast adds, “Most organizations still rely on tedious, time consuming and manual activities for the month-end close leading to oversights and errors.”
Errors not only hold back visibility, they take time to fix. Manual processes beget other manual processes, and the time spent fixing bad calculation adds up.
Tribalism and Tension
It’s great for a person to take ownership of their role—until they become the only person with the knowledge needed to do the job. Not only does this make it nearly impossible to replace the person in charge, it exposes the organization to fraud and exposes the process to tribalism.
Per FloQast, “Tasks are based on historical processes known only to those with the responsibility to complete them. If they leave the organization, the team has to scramble to recreate them.”
This results in a variety of challenges. Maybe it’s a “why are you questioning me” mentality, maybe the employee is using complete ownership to bury fraud. This tribal knowledge presents a challenge.
Much like the budgeting process, the close process relies heavily on emails, shared spreadsheets, and elbow grease. Sadly, this does not add to visibility or flow. Close checklists are frequently individualized and do not offer the ability to share workflow or status with the extended team, requiring frequent status meetings.
Email takes time. Meetings take even more time. And for the person in charge of finalizing everything, the emails and meetings needed to verify data take even more time.
Haste makes waste. But when haste meets manual, disjointed processes, it makes for a complete nightmare. If you’re rushing to finalize the close, a keystroke slip or a missed entry isn’t just annoying, it’s hard to track. Closing activities are typically a dash to the finish line without the time or process to ensure an accurate outcome.
In turn, this reactive rush means that not only is something inaccurate, there might not even be an audit trail that can verify data.
Related: How Auditors Are Staying Focused in the Wake of COVID-19
Disassociation from the Rest of the Business
With the finance department finding its way into new roles, the close process hasn’t. Numbers may end up in your hands, but rarely will the close take place with the needs of other business lines considered. Add to this the lack of auditability, and this process is often out of touch with business needs.
Bigger picture tasks suffer from a myopic close approach, with little consideration for future organizational ramifications or time for strategic business evaluation.
The Cure? Improved, Auditable Close Processes
So now that you know some of the most common challenges that go into running the monthly close, how can you take steps to improve?
In a free guide from Controllers Council sponsor FloQast, this leading provider of monthly close technology discusses how to approach the wide variety of challenges presented in the close process, as well as tips for improving the speed, accuracy, and collaboration that goes into it.
Written to help finance leaders discuss ways to shorten the close cycle, improve accuracy, reduce stress and help you be more efficient, the Definitive Guide to Effective Close Management takes a deeper look into the aforementioned challenges and explores tactics and strategies to evolve.
In this guide you’ll learn, tips and recommendations for building the optimal accounting team, best practices to structure your checklist, along with templates you can use, and how to best structure supporting documentation. Click here to learn more and download today.