Even the most seasoned finance teams can find themselves mired in stress as they prepare for year-end closing. And once they're in the thick of the actual year-end closing process they've been dreading? It can feel like an all-out fire drill. If this sounds familiar, we're happy to say that it doesn't have to be this way and there are ways to notably improve your year-end close.
While there may be no such thing as an easy year-end close, the right strategy and improvements can streamline the process and give accounting teams a reason to stay calm as the fiscal year turns over. Whether it's that time of year for you or you've just barely made it through close and know you need a better way, we have a few year-end close tips to help reduce headaches.
To Improve Year-end Close, Optimize Quarterly and Month-end Close Processes
One way to anticipate areas for improvement in the year-end financial close is to pay close attention to what's slowing or complicating your monthly and quarterly close process. Performing a simple walkthrough to document each step in real time will help you understand where you're investing your resources and help identify error-prone processes.
Paying extra attention to the close cycles that lead up to the "big one" serves another, especially important reason — you'll be able to catch errors before they have the chance to snowball into a major reconciliation headache during the year-end financial close.
Engage Your Accounting Team Early on in the Close Process
Unless you're overseeing the entire process yourself, the accounting department plays an instrumental role in closing the books each year. By bringing them in early on in the process, you'll be setting yourself up for a smoother close and ultimately improving your year.
The earlier on you engage your team, the less likely you are to run into:
If coordinating the year-end close falls to you, you need everyone on the same page, and you need them there early. You can use a kickoff meeting with the accounting and finance team to establish your goals, understand what concerns your team may have and outline a game plan for the days and weeks to come.
Inefficiencies that slow the close
By bringing your team into the conversation and doing it before you're in the thick of it all, you can identify areas that can be improved for efficiency. This includes error-prone manual data entry that can be automated (more on that in a bit), processes that can be streamlined or resource gaps that can be addressed before they become a problem.
Inaccuracies in the close process
The only thing worse than a slow or chaotic year-end close is an inaccurate one. Besides carrying the risk of having to reopen the books and start again, inaccuracies in reporting can mean trouble with compliance and fundraising when they're caught and result in important decisions being made with the wrong information until then.
Errors on income statements and financial reports can carry big penalties and have a lasting negative impact on the company and are easier to avoid the earlier you get started.
Streamline & Document Processes to Close the Books More Smoothly
Nothing in the year-end close process should exist solely "inside someone's head". Closing tasks, resources used to perform them and their processes should be universalized and documented for two important reasons. First, getting everything "on paper" allows you to identify and address problem areas. Second, you'll be equipping your team with easily accessible information about how to close on-time with accurate information.
Automate Wisely to Reduce Errors & Close Time
Leaders that have been putting off technology investments may want to use this time to budget them into the year's initiatives. Much of what slows or complicates the year-end close are the result of repetitive, manual work that's prone to error. A transposed number in the ledger account or labyrinthine navigation processes in the chart of accounts can result in hours of lost time and fixed with smart automation decisions.
Track Progress Toward Your Goal With the Right KPIs
According to benchmarking authority APQC (American Productivity and Quality Center), the slowest closes take as long as 45 days, while the highest performing teams can get it done in 15. Obviously, there's more to the close process than the amount of time it takes, but chances are high that there's an area you know you could improve on.
Download eBook: Building Strategic Controller Dashboards: Essential KPIs
Whether it's reducing time-to-close or errors in the process, improved future closes depend on choosing a metric or metrics to focus on and then using the right KPIs to track progress toward those goals. It ensures accountability and gives you an effective tool for creating a roadmap for the closing process.
Invest in Your People to Improve Your Year-end Close
When it's time to close the books at the end of the year, your team makes it all happen. They're working at full capacity and may even be contending with a monthly close just as they're getting everything squared away for the previous fiscal year. It can be a stressful process that's exacerbated by understaffing thanks to the current shortage of qualified accounting talent.
Protecting your team from burnout during the close cycle shows your team that you're invested in their well-being, and it carries another obvious benefit in the form of higher productivity and lower error rates. One way to reduce burnout and keep your team focused on the task at hand is to bring in an outsourcing partner that can provide you with an effective and highly skilled virtual accounting solution.
Personiv has been helping finance leaders transform their year-end close from a high-stress fire drill to an optimized and efficient process for over four decades with highly skilled accounting professionals and a culture of continuous process improvement. Make this year's close the last for late nights and last-minute headaches — contact us to get started today.