Overview
So many accountants work like they’re on on a hamster wheel, going through the same inefficient process month after month, without giving it any question or thought. Accountants don’t tend to like change, even if we’re talking about a positive, life-altering change! It doesn’t help that they aren’t often prioritized when allocating resources for systems and people. But due to a variety of factors (COVID, accountant shortage, a variety of technology tools, and plenty of success stories), it’s getting more focus than ever before.
Even without some of the great tech tools available, there’s a lot you can do to reduce your month-end close timeline and effort. In this article, we’ll discuss why it’s so important and three ways you can do it: performing accounting continuously, eliminating unnecessary work, and optimizing whatever you can.
Why reduce your close timeline
Well, why not? Why spend more time on something than you should? This is the key to change – asking yourself (and colleagues) why. Buy-in is the best way to see any transformation through! The biggest pushback people give on not closing the books faster is to record and report the most accurate figures possible. While accuracy is a noble goal, you shouldn’t be forced to compromise timeliness, or the accuracy might not even matter. That’s why the accounting materiality concept exists – you can and should balance accuracy and timeliness. Ultimately you have to define your why based on your culture, initiatives, and priorities.
Here are some common factors to help you define your why:
- A quicker close accelerates the visibility needed for key decisions so that you don’t miss opportunities to reduce costs or expand revenues.
- It enhances the capacity of your accounting team, freeing up these valuable resources to collaborate on strategic projects.
- It increases quality, morale, and engagement, leading to reduced risk in compliance and reputation.
Perform accounting continuously
Much work associated with the close takes place during the close, but it doesn’t have to. The ideal approach is a continuous process – where transactions are accounted for as they occur – not at the end of the month. We’re not necessarily talking true real time, but daily or weekly is ideal. Important processes with a lot of volume or risk should be looked at daily (or at least weekly).
A great example is cash-related accounts (banks, credit card receivables, etc.). Another opportunity is accounting for items where you already know the answer. Prepaids, leases, debt, etc. – those with a schedule of amortization or known activity – go ahead and record, support, adjust/amortize, and reconcile them well before the month ends. Lastly, estimate where it’s prudent. Accruals are a great example here. Use recent trends and drivers from the underlying data to build a precise estimate.
Push everything you can into the “pre-close” period (before the month actually ends). Performing them more frequently might take more a little time overall, but it will take less time during the crucial close period. Automate as many data feeds and logic steps as you can for journal entries, reconciliations, and reporting so you can focus on analysis and review. Use a centralized, automated workflow-driven process to keep things moving and to be alerted when things change so you can address the changes and work more by exception.
The biggest benefit to a continuous accounting approach is that it spreads the workload across the month, cutting down on close overtime spikes. A secondary benefit that’s quite large for some companies is that you are addressing errors as they occur (not weeks later). No one likes surprises, right? This often results in less write-offs!
Eliminate unnecessary work
The single biggest efficiency gain you’ll ever see is 100%, and that’s what you get when you eliminate truly unnecessary work. Then why is so much unnecessary work done? Usually it’s because there is a lack of purpose, priority, or mindfulness that goes with each task. Everyone is in SALTY (same as last time/year) mode and doesn’t want change. It often happens slowly over time, like arteries clogging up.
Teams are also often not empowered to question the necessity. Here’s the easiest way to determine if it’s necessary when you’re not sure: just stop doing it. See if anyone notices. I’ve done that before, but use it with caution! Here’s the more politically correct approach: ask someone. Ask gracefully and offer alternatives if applicable.
Track the time that might be wasted…really, it’s good to track anything in a thorough, collaborative checklist. Understand and document the purpose for anything you keep. Continuously do this for your team’s tasks, prioritized by the ones that take the most time and produce the most errors or frustration.
Clearly the biggest reason here is to save time, but don’t miss the opportunity to enhance the morale of your team. When people understand the purpose and importance of their work, it’s much more engaging.
Streamline whatever you can
Streamline does not just mean automate. Often just rethinking the process and optimizing the order can go a long way. Consider the biggest picture down to the most granular detail and how everything interconnects. Perform tasks in parallel wherever it makes sense. Minimize the bottlenecks and error points. Combine any steps you can, down to the keystroke (keyboard shortcuts are wonderful!). Make sure steps are documented, clear, and repeatable.
Then layer in automation. If you automate a bad process, you’re just making a bigger mess faster! Automate as much of the process as you can, work by exception, and focus on analysis and the valuable parts of your job. Think through the logic once, apply it often, and refine it when you need to. Common accounting processes worth automating are reconciliations, journal entries, variance analysis, and reporting.
Streamlining and automating processes is a huge way to shave days off of your accounting close. It saves time, reduces errors, and keeps your team fresh and engaged. A huge chunk of that time reduced is the back-and-forth messages, meetings, calls, and waiting on others – don’t forget how significant that is! Also, just keeping everything organized, having clear responsibilities and status visibility, and always being ready for audits and other reviews is extremely valuable.
Summary
Closing the books more quickly is one of the biggest goals of people I’ve spoken to day in and day out over the last several years. Usually, it’s tied to a strategic initiative to enhance the overall data and reporting process, but it can also be a broad focus on efficiency and operating lean. Whatever your reasons, there are often a variety of direct and indirect benefits for condensing the close, and among them is empowering your team. Happy teams lead to happy customers, and happy customers lead to happy shareholders.
What steps have you taken to optimize your close process? Please let us know in the comments below!
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