Has the time come to improve your financial closing processes? Are you done with the days (and weeks) of wasting time, stressing out and still coming up short?
Nobody can tell you exactly how to improve financial closing processes at your company, but there are some steps anyone can take to get on the right track.
Answer these questions before you do anything else:
- What does your current closing process entail?
- What has worked well for you and your company in the past?
- What’s costing you time?
- What’s leading to mistakes?
- Are you using any tools to streamline your financial closing processes?
Now that you have answered these questions, you will have a clear idea of how to approach these five potential improvements:
1. Automate, Automate, Automate
Without automation, you’re left to manage the entire process manually. That includes collecting information from employees, inputting data, calculating expenses and revenue—and that’s just the start.
Automation driven by financial close management software allows you to move more quickly and efficiently, which saves you time and reduces the risk of errors.
Can you automate financial closing processes from beginning to end? Probably not. There are times when manual input is required. But you can definitely automate to the point where you are undoubtedly saving time.
To learn more, read our blog on overcoming the barriers to automated account reconciliations here.
2. Prioritize Account Reconciliation
Accounting process improvement doesn’t necessarily mean you have to tear down and rebuild from scratch. Sometimes, it’s the small steps that help you reach big goals.
Reconciliation is an important part of the closing process. It helps you identify errors and better understand the overall financial health of your business.
But there’s a problem with this: Account reconciliation shouldn’t happen only once per month.
Get into the habit of reconciling accounts throughout the month. Waiting until month end increases the risk of a minor mistake snowballing into something much more serious.
It may feel like you’re spending unnecessary time reconciling accounts at the beginning and middle parts of the month, but it’ll actually save you in the end.
Automation (see above) is critical to reconciling your accounts more regularly. This allows you to get the job done with minimal effort.
Here’s how Vena’s account reconciliation software works:
Vena’s account reconciliation software streamlines data collection and integration with your source systems—such as your ERP/GL system and other subsystems—so you can quickly access relevant supporting documents. Vena also automates journal entries and simplifies reconciliation calculations so you can produce accurate financial statements on time.
3. Assign Tasks and Responsibilities
If you manage every aspect of the financial closing processes for your company, you don’t have to worry about this. But if you’re like most people, you work with a team to complete this overarching task and the many responsibilities that go along with it.
Once you have a clearly defined process in place, it’s time to assign tasks. The benefits of this approach include:
- No double work
- Everyone knows what they’re responsible for
- Less likely that one person will feel overwhelmed
Assign tasks, set deadlines and give your team everything they need to succeed.
4. Streamline Data Collection Efforts
One of the biggest challenges you face during financial closing is the ability to collect the necessary data in an efficient and timely manner.
It’s critical to your long-term success (and sanity) to implement a streamlined and universal system for data collection. You don’t want one department submitting data via email, another via Slack and yet another via snail mail. That’s too much to manage.
Implement a system that every employee and department head can use to submit the required data. And even more importantly, hold them to it. Make them submit the information in this fashion until it becomes second nature.
You have enough on your plate so the last thing you need is to spend hours on end chasing down data.
5. Start Early
Even if you’re 100% comfortable with your company’s financial closing processes, it never (or rarely) makes sense to wait until the last minute.
Let’s assume that you have until August 31st to complete the process. Is it easier to start on the 15th of the month or the 30th?
Even if you think you only need a day or two at the most, don’t wait until the last minute. Roadblocks always come to light, such as departments that are late sharing expense data or missing loan statements.
When you start early, you can set aside time every day to inch closer to your end goal. And that’s preferred to finding your back against the wall at the end of the month, quarter or year.
Now that we've looked at how to streamline your financial closing processes, let's look at some of the common headaches you might still encounter along the way.
5 Common Headaches Businesses Face in the Financial Closing Process
If the financial close process continually challenges you, it’s time for a change. It’s time to pinpoint your concerns, implement a fine-tuned strategy, and put this stress-fest behind you once and for all.
For many companies, the first step in taking action is understanding the most common headaches they face in the financial closure process. Let’s head down that path.
1. No Defined Process
If your financial close process is often run by a loosely defined set of steps and the memory of those in charge, as opposed to a distinct set of well-thought-out protocols, you’re not setting yourself up for success.
As a whole, a lack of a defined process is a giant headache. And when you break it down, you’ll run into smaller problems such as:
- Different people taking a different approach
- A long list of tasks that aren’t collated in the same place
- No timeline or benchmarks to measure progress
Your financial closure process should be defined, documented and shared with the appropriate employees. This makes for a more efficient process that generates the desired results in a timely manner.
2. No (Or Inefficient) Automation
Let’s face it: there’s no way to automate the entire financial close process. There will always be tasks and steps that require manual input. And that’s okay.
Your goal is to automate as much as possible, without losing touch with the process itself.
Automation lends benefits such as:
- Improved efficiency
- Faster closing process
- Protection against errors
- Transparency across the company
With defined processes in place—such as those for collecting data—you can easily hand over tasks to your financial close software.
3. Problems That Carried Over From the Last Close
Any problem, big or small, requires immediate attention. Letting an issue carry over from the last close will only cause more headaches and stress in the future.
For example, your company may not have a defined system in place for collecting expense receipts from multiple departments. You’ve always made it work in the past so you continually put off the opportunity to implement a solution. But that’s no excuse to stand put.
When you find a problem, address that problem as quickly as possible. And never let it carry over to the next financial close. As you solve the problems that have plagued you in the past, you can improve the financial close process in the future
4. No Access to Real-Time Data
Do you continually wait until the end of the month, quarter or year to collect and upload data? Do you often find yourself chasing team members around for the data you need to finalize the financial close process?
Waiting until financial close to collect data is a problem on two fronts:
- You don’t have a solid grasp of where things stand during the month, quarter or year
- It costs you time during the financial closure process
The more data you can access in real-time, the easier it is for everyone to stay on the same page day after day. With technology driven by automation, you can gain access to real-time data that eliminates the stress of chasing it down when the time comes.
5. No Standardization
Even if you’re solely responsible for the financial close process, it doesn’t mean you can do everything on your own. You still need help from others, such as retrieving data related to departmental spending.
This is where a lack of standardization can bog you down. From product managers to PR professionals to sales and marketing teams, every department has something for you. While that’s expected, the last thing you need is everyone sending you data in a different manner.
Product managers send you expense claims via Slack. Sales managers share receipts as email attachments. PR and advertising executives drop off paperwork in your office.
Every person and every department wants to do things their own way. They want to do what they know and what is easiest for them. The problem with this is that you’re left to pick up the pieces.
Don’t let this issue linger any longer. Implement a standardized system for collecting all the data you need. Some people may resist, but they’ll eventually realize that it’s best for the company as a whole.
Accounting process improvement is not a one-size-fits-all solution. Make decisions based on what’s best for you, your company and the issues you’ve run into in the past.
Vena’s financial close management software makes it easy to close your books with confidence. From the ability to automate time-consuming financial close tasks to enterprise-level security for your peace of mind, you can simplify the processes that you’ve dreaded in the past.