If You Want to Close Faster - Here’s What to Do
One of the constant battles in accounting is improving and shortening the month-end close. While the process can be time-consuming, there are ways to streamline it. Before you can optimize your process, you have to identify what hinders it and then look for solutions. Which is why accounting teams and organizations benefit from taking a closer look at their month-end close. The sooner you have accurate information on hand, the faster you can provide decision-making information.
Temi Vasco of GEM has a clear system that optimizes their month-end close. She ensures that everyone is aware of the business’ priorities, which helps her implement solutions that make the month-end close more efficient. In addition, the accounting team does work leading up to the month-end close to make it smoother.
Vasco also collaborates with others in the organization to ensure they have their expectations set and know what will be needed from them. She says, “During the cycle, we're constantly communicating with stakeholders — we let them know things ahead of time.” Vasco’s ultimate goal is to have less than five days worth of data to reconcile at the end of the month.
What hinders the close process?
Decisions require data —- and in finance, getting that data is an intricate process. Many factors influence your ability to close your books each month. Some common challenges include:
Anytime something changes in your team or company, it will likely require you to alter your processes. For example, if you experience rapid growth, your close process could experience a surge in the amount of work you need to do. If you’re unprepared, you may be left scrambling.
Another common change is bringing your accounting processes in-house. As a startup, you may have outsourced in the past. As the business grows, the desire to control the close process may result in forming an accounting team. However, if you haven’t looked at what it will entail and developed a clear workflow, the closing process will likely take longer even after being brought in-house.
The month-end close relies on data from other departments. If people lack clarity about what’s needed, or there aren’t systems in place to collect that information — it slows down the process.
Another angle to consider is whether you have a complete list of everyone that you need information from. If you don’t, it might be something you have to hunt down in the middle of closing the books, which leads to time lags.
Lack of expectations, communication, and education
If people don’t understand the importance of a month-end close, it can create a more lackadaisical environment. And even if your accounting team understands how crucial it is to the business, stakeholders need to as well. People are less inclined to prioritize something if they don’t see its value.
Not evaluating your process regularly
If your close has friction, it can fester and grow if you don’t pinpoint the cause. This is why teams must evaluate their close process on a regular basis to identify weak or troubled areas in their accounting and workflows.
Poorly designed workflows and processes
Your month-end close is only as efficient as its workflows. And teams that haven’t continuously improved on it often have a slower close. One example is not having a close checklist. Without it, you aren’t able to easily see where you are in the process — meaning you’ll have to take extra time to determine what’s been done and what’s still left to do.
Lack of systems that can help streamline the process
Accounting teams have earned a reputation for making do with spreadsheets. Yet there are systems and software that take some of the manual labor out of your process. Without considering these systems, your close process becomes more hands-on. You lose the ability to automate, filter, and format more efficiently — and, at times, more accurately.
Why is efficiency important in the close — and what affects it?
Accounting teams have become a highly valued part of organizations. Instead of being seen as in the background, they are the people who can give essential decision-making information. They ask themselves, what does our organization need to thrive and grow? And how can we support that?
Vasco used the example of her company’s burn — and why it's important to be efficient. “It’s making sure that we're providing timely information for making business decisions,” she says. “'If we’re giving information about our burn a month later, for example, we've already wasted four weeks without changing our trajectory.”
Efficiency is often affected by bandwidth, lack of priorities, or a bottleneck in the process. You may have competing demands if you haven’t clearly set expectations.
Another area that affects efficiency is not knowing how to measure the success of your close process. This takes identifying KPIs, and an understanding of what information is a priority to the company. Many teams also lack the right tools to help streamline the process.
Best practices for a faster close
The first step for a faster close is to evaluate your process. Where are your primary areas of trouble or bottlenecks? What takes the most time. Watch at least one full cycle before tackling the issues. From there:
Address improvements one workflow at a time
When you’re motivated to make improvements in your processes, it’s easy to get carried away. Vasco knows this. “One of the mistakes that I made was I tried to do everything all at once. And I paid for it,” she says. Her advice now is, “Pick one thing at a time and focus on it, optimize it, get it done, and then pick something else.” She acknowledges that it can feel like spinning your wheels. But to try and do it all at once can actually hinder the efficiency of the month-end close further.
Get your team and company on board
Communication is key for accounting teams. Not only within the team, but with others. You’ll want to set expectations, and educate why the month-end close is so important. Vasco shares with her company that best-in-class organizations close quickly. And that gives them timely data to make better decisions. She also communicates and meets with people frequently — on a weekly basis. In essence, she gets everyone involved to help streamline the process.
By asking questions, you get to know what information helps the company most, and you can better identify what you need from people.
Implement a close checklist
A checklist makes it far easier to stay on task. It also lets you quickly filter what’s done and what isn’t done. A checklist may help you find a person or area that’s consistently behind, which would be an area to address to make your close faster.
Move more work to pre-close
Don’t wait until the end of the month to collect information or do tasks that could be done earlier in the process. Look for parts of your close that can be done early.
Understand the role of dependencies
Evaluating your process lets you identify dependencies, so you can better communicate with stakeholders and team members, and optimize your process around the tasks that prevent other tasks from being able to be completed. Take note of external dependencies that might be hindering the close as well. For example, information from outside vendors.
Automate, automate, automate
Any time you can eradicate manual labor, do it. There are softwares and tools that can help teams automate the close process, efficiently reconcile data, and ensure controls are in place and maintained.
Build feedback loops
You’ll want to identify the KPIs that let you know when you’re on the right track and where improvements are needed. KPIs will differ between companies, and it is important to identify which measurements are specifically pertinent to your organization. Temi’s team does monthly deep dives into what went right or wrong in their close process, so they know where to shift their focus for the next month. They also pay close attention to their accruals. “We try to keep estimates within 3% accuracy,” she says.
Goals are essential for a faster close. If you’re at 10 days, aim for seven. If you’re at seven, for five. The days are a measure of efficiency in terms of processes. Therefore, continually revisit your workflows for bottlenecks, areas of chronic lateness, or tasks that can be done earlier, so you have a quicker, more efficient close, while still maintaining accuracy.