At the end of each month accounting departments collect, analyze and record financial data in a process known as “closing the books.” When financial staff members perform these tasks in a structured environment, managers can obtain timely and accurate reports. This ultimately helps businesses make strategic decisions and remain adaptable.
But for many businesses, this monthly closing process is fraught with error and frustration. If this sounds familiar, don’t assume that such problems are intractable. Start the streamlining process by addressing the following common issues:
- Undocumented processes. Take the time to document procedures that can be replicated each month. Create a checklist of duties and activities organized by due date. Simplify your chart of accounts. Review journal entries to determine whether materiality (significance) is being considered. If practical, raise dollar limits for certain transactions to avoid pointless recordkeeping.
- Tardy financial data. Find out why data from certain sources is routinely late. Other departments or vendors may not understand the need for timely information. Their staff may need a specific type of training or a refresher. Another option is to reconcile key accounts more frequently, which will reduce your reliance on last-minute records from outside the accounting department.
- Understaffed accounting teams. You may lack funds to hire more staff, but cross-training some employees to handle critical steps in the closing process may be a viable option. As long as an experienced financial professional or manager is given overall responsibility for the month-end closing, this alternative may work for your company.
- Lack of automation. Don’t rely on spreadsheets and manual processes that may not allow for making timely revisions or corrections in your accounting systems. Designate a tech-savvy employee who can research management’s data needs and your current software’s reporting capabilities.
Finally, don’t hesitate to ask for outside help when needed. Give us a call if you have questions about streamlining your financial data for tax return purposes.