Although technology has advanced, efficiency has increased, and processes have been streamlined, month-end closings are still busy and typically manual.
According to a poll published in The FinTech Times last year, the majority of respondents had little faith in their month-end closure procedures and said the reporting process was time-consuming, resource-intensive, and difficult.
The stress related to month-end closing is something that many accountants can identify with or have gone through. Month-end close is crucial because compliance assurance begins with monthly reporting.
Effective methods historically suggested for improving month-end processes
The first and most important of the recommended practices described in the article, is creating standard operating procedures and documenting them. It is not unexpected because many financial departments inside businesses have their own "style of doing things," or, more specifically, practices and traditions that have been handed down from one employee generation to the next and have been proven effective through time.
It is even less unexpected that the loss of any important person in the finance department throws a corporation into turmoil as the month-end closing approaches because this manner of doing things is so pervasive and deeply ingrained into some corporate cultures.
Spreading out work entails starting accrual and impairment calculations and creating journal entries in the middle of the month to ease the burden at the end of the month.
Technically, this would lessen the workload, but it wouldn't completely lessen the pressure towards the end of the month. The same number of hours is still put in, if not more; they are merely spread out over a longer period or among more people.
Realistically, there will probably be more hours involved. Any expert would naturally want to review the work that they completed a week or two earlier as well as the work completed by others. Finance professionals who frequently handle the month-end closure process are multi-skilled and have much more to offer to the company than tasks that take up a large portion of their time in a support capacity. These tasks also represent a major loss of opportunity.
Automation: The key to unlocking the full potential of your finance department
Automating the month-end closure does not just move some of the needed labour to other times of the month, other people, or other departments, as the approaches outlined in the preceding section do. According to the Journal of Accountancy's list of prerequisites for an effective manual month-end closure procedure, these are just a few:
- Coordination between all parties involved in keeping journals, including people, departments, and other parties
- Using standardized templates and criteria to verify report properties and reduce the likelihood of mistakes
- Establishing, preserving, and updating standard operating procedures, emergency plans, and escalation routes
It should be taken into account that this procedure will include several departments because the data required, covers the whole company. A single report must be created using data from sales, supplier and customer accounts, inventory management, bank accounts, and asset management. It frequently happens that a company uses software to assist with account management.
The inability to adapt to regulatory changes, a lack of interoperability with other software used in the company, and a failure to consolidate all the data required to finish a month-end procedure are all common downsides of legacy software.
All the journal entry data necessary for month-end closing may be integrated and updated continuously by cloud-based or on-premise software, like TransformHub's ERP system. This software is not only connected across the company; it can also be used to manage accounts payable and external payments to suppliers.
This is also available for accounts receivable and payments from customers. You simply need to consider how much time is spent on month-end closing procedures to see the worth of such a system and how it may save your finance department and company a lot of time.
Implementing an automated solution
Most companies are not as agile as they would want to be. As senior and experienced staff are used to specific methods, the adoption of new practices may be faced with resistance to change. In some business cultures, taking risks is discouraged; therefore introducing a new system would put the change's instigator at danger of failure and potential blame. The benefit of TransformHub's ERP is that your company need not undertake fundamental changes to see if the strain of the month-end closure procedure will be reduced. Your company's skilled workers are wasting time on non-value-adding tasks if an automated system isn't in place.
TransformHub's ERP offers real-time business analytics, budgeting, forecasting, and other types of data in addition to automating journal entries and the general ledger. Last but not least, using antiquated technologies is a security risk in a time when organizations of all kinds are attacked by hackers.
By allowing your finance department to ask the correct questions and advance your company, this ERP software will save time spent on tasks like checking the validity of data and figuring out whether financial reports comply.
Reaping the benefits of an integrated approach
Billing conflicts and unreconciled accounts are often reduced by 50% for corporate organizations using this technology. In bigger conglomerates, this may equate to a saving of tens of thousands of man-hours and thousands, if not millions, of dollars, which can then be put toward projects and initiatives that promote corporate expansion.
You would be wise to think very carefully about making this investment if improving the financial closing process is crucial to your corporate group.
Many systems, one solution
One way to solve the problem is to mandate that all organizations within the group standardize their internal business processes and ERP systems, but doing so can be a significant endeavour. The time and money required will probably be a sizable impost and call for the allocation of seldom used internal resources. The issues continue in the interim.
Adopting a comprehensive solution, an ERP-independent tool that enables you to organize and implement a standardized intercompany transaction procedure across your whole ecosystem of entities, is far quicker, easier, and inexpensive.
Software for automated intercompany financial management performs this precise function. By allowing operations and financial teams throughout the group to focus on higher-value work, it increases the closure time and accuracy and lowers intercompany administrative expenses. It also integrates with global vendor invoice management capacity.
Contact us right away to arrange a free trial if you're interested in finding out more about how TransformHub's cloud ERP software might relieve some of the pressure on your finance team's month-end closing procedures.
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