In Pursuit of Profit
Read our expert article below or sign up to get articles sent to your inbox.
As such, improving accounting close has become a main focus for many accounting teams over the last several years as business demands have grown and hiring qualified accounting staff has gotten more difficult.
Strategies to improve close can focus on making your accounting close faster, more accurate, or less painful… and, if you do it right, all three!
Use these 8 best practices to improve close at your company:
1. Formalize the Process
Detailing month-end accounting close and year-end accounting close activities is key to improving overall close processes. In smaller businesses these activities are usually handled informally, but as the company grows and/or brings on additional staff, this approach will no longer be feasible. Formalizing your accounting activities is a key part of running your business, providing business continuity regardless of turnover and allowing it to scale in response to growth opportunities.
Outline what you will do and how you will do it. The goal is to create predictability. Standardize repeat activities like reconciliations and allocations and make guidelines around other less common activities as well. Pay particular attention to areas where bottlenecks occur and determine how to smooth these out to reduce friction and increase the speed of your close process.
Once the process has been detailed, communicate it both within your accounting team and company-wide so other departments understand the role they play as well.
Note: Closing the books is just one part of your overall accounting process. If you don’t already have a formal Accounting Policy and Procedures Manual, now is the time to get started!
2. Assign Roles
Once you know what needs to be done figure out who will do what. Encourage employees to take ownership over the process to foster greater accountability and improve the value of the work they are doing. Cross-train employees on key tasks and establish backups in case an employee is out unexpectedly or gone for a prolonged period of time.
3. Communicate RegularlyEnsure bookkeeping and accounting staff is in good communication with the rest of the company regardless of where they are located. Once of the biggest challenges with remote accounting staff has been giving them the access that they need to other team members to accomplish their ongoing tasks like closing the books. With employees more geographically spread out, information sharing practices must keep up with these barriers, especially between accounting and other teams like sales, which may have figures that they need to close the books.
4. Reconcile Accounts Regularly
Do not wait for month-end close to reconcile bank and credit accounts. Instead, do reconciliations more regularly to avoid adding unnecessary stress at close. Reconciliations can uncover errors and mistakes that need to be fixed and doing so ahead of time eliminates the need to do extra work when closing the books.
5. Automate Where Possible
Manual entries are more prone to errors. Keeping track of things asset depreciation in excel and then inputting them is neither efficient nor the most accurate way to handle your accounting because they must be manually updated and shared over and over every time there is a change.
Automation is the best efficiency saver during accounting close. Reduce errors by using software to automate things like invoicing, employee reimbursements, and payroll. Maximize the benefits that your accounting software offers and utilize apps and other add-ons to supplement it when needed.
6. Organize and Protect Data
Keep clean books as you go and then organize data and files and keep them up to date in a location where everyone who needs them can access them. Utilizing cloud accounting software is a great way to ensure that real-time financial information will be accessible to those with access regardless of where they are working. But regardless of where data is kept, regularly back it up in case files are lost or corrupted for any reason.
If it hurts, fix it! That is to say, if some part of your close process causes pain every month, it may be time to make a change. If using too many systems or systems that do not “talk” to each other is the problem, it may make sense to migrate to a new platform or upgrade your plan to offer more robust features. Talk to a consulting accountant for advice on what makes the most sense for your company to use given your current needs and processes.
8. Always Be Improving
Once you’ve taken the above steps, don’t stop there. Always be looking for ways to improve. Aim to improve incrementally as business needs evolve, staffing changes are made, and new technology becomes available.
Need help with your month-end or year-end close process? We offer bookkeeping and accounting services to help busy business owners get more done. When you outsource your bookkeeping to us you have the reassurance of knowing that our highly experienced, US-based team of accountants has the breadth and depth of knowledge to handle your books correctly. With vast experience across a wide number of accounting systems, business types, and industries we have the personnel needed to serve your unique business needs.