Monthly financial statements are the most important strategic tool for an organization. Accurate and timely statements provide vital data to support fiscal monitoring and decision making, prevent costly mistakes, and prepare you for tax time.
Our Chief Financial Officer talks about what to include in your Month-End Close Process to successfully manage your month-end. We’ve included the highlights here. The full paper is available via the download button.
THE MONTH-END CLOSE PROCESS
Timely and accurate financial statements can help your organisation make informed, strategic decisions.
Arguably, monthly financial statements are the most important strategic tool for an organisation. Accurate and timely statements provide vital data to support fiscal monitoring and decision making, prevent costly mistakes, and prepare you for tax time.
But financial statements are only valuable when prepared accurately using a sound basis of accounting such as Generally Accepted Accounting Principles (GAAP) and produced within a reasonable period after the month has ended.
Month-end close is an essential process that can be refined and streamlined to achieve maximum efficacy with minimum error, waste, and disruption. Establish firm closing dates, and develop processes to ensure all the necessary information is available and complete when it’s time to wrap things up for the month. Invest in developing a fully integrated software environment to slash the “grunt work” of tedious manual workflows and eliminate obstacles and human error.
The month-end closing process must be correct to ensure the accuracy and completeness of your financial statements and balance sheet. It’s neither glamorous nor particularly enjoyable for many, but month-end close is essential to the health and happiness of not just your accounting department but your entire organisation.
Traditionally, month-end closing has been seen as a time-consuming and occasionally frustrating process—a sort of “necessary evil” in bookkeeping. But by taking the time to understand its particulars, implementing a clear and concise checklist, and investing in the right technology, you can ensure your month-end close is quick and (nearly) painless, without sacrificing accuracy or completeness.
Successful monthly (or other periodic, e.g. quarterly) reports are critical to developing financial statements and other data such as key performance and risk indicators. This result requires controlled and coordinated activities throughout the month. It also means processes and procedures that are well thought out, documented, and incorporate internal controls such as segregation of duties across all appropriate departments.
THE MAJOR TASKS
Although the closing process must be well-orchestrated, it doesn’t have to overwhelm. Let’s break down the major tasks as follows:
THE IMPORTANCE OF MONTH-END CLOSE PROCESS CONTROLS
Most accounting teams use a process control checklist to control the month-end close process.
On one end of the spectrum are organisations with minimal documentation of the month-end process. And run the month-end process based on the CFO’s knowledge and experience. This often leads to ad hoc manual processes. That can work for a while, but as the accounting department grows, that process can become chaos when tasks can be easily overlooked, especially if a key person is out for a few days.
On the other end of the spectrum are accounting teams that follow a well-thought-out and optimised process with interactive checklists, workflow tools, and who leverage all the automation they can. These teams use everything their accounting system has built-in plus technology used to the maximum advantage.
Wherever your team is in that spectrum, a comprehensive checklist that includes all the processes and assignments is a must to streamline the closing process. Ideally, your checklist should make it easy to swap tasks between team members to keep the process moving efficiently.
At Phundex, we wanted to make these processes more straightforward and transparent, so everyone can quickly see who is working on what and communicate efficiently on shared tasks. Phundex can immediately add significant value to your existing processes, whatever they are, by adding
All of which improve governance and make your work more manageable at the same time.
You may also want to see our article on how Phundex can help you manage your business Month End Close Process
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