For a process that occurs every month and consumes a significant portion of a finance team's time, we don't spend a lot of energy on ensuring it's an effective process. Sometimes, we need to take a step back and ask ourselves, "Is my month-end close process as efficient as it could be?" Time is always a precious commodity for finance teams, but one way you can create more time is shaving some inefficiencies from your month-end!
So sit back, grab another cup of coffee, and see if your team could benefit from any of the following tips.
Do you have a clear work allocation?
Nothing will kill your team's rhythm more than not having a clear work allocation, covering both the preparer and reviewer where necessary. Efficiency at month-end comes from team members being able to manage their own time. If there are delays in one area, they should know exactly what to move on to next without having to ask or check in with other members of the team. I am not advocating a month-end close work allocation that is set in stone, you will always need degrees of flexibility. However, there does need to be an overarching plan to ensure that a new allocation is not created each day or week and then circulated, or that people are waiting to be told what to do next.
It is important to have your work and review allocation documented in a file everyone can access. If you ever find yourself saying, "But everyone knows what to do, why do we need to write it down?" stop and think about what happens when a team member is on holiday, gets sick, or there is a new starter in the team who constantly asks you what they should be doing every 30 minutes. Save yourself the pain and document who is responsible for what.
Have you moved work to pre-month where possible?
Put simply, always move tasks to pre-month end if you can. You may think you're too busy in the days leading up to month-end, but it will always be worse once month-end has ticked over. If there are items that can be processed before month-end, move them earlier and save yourself the overtime that will inevitably come later in the process.
This can also be applied to when a task can be started as well. If you can complete the majority of a process pre-month end and then simply add a few more lines for the last days’ worth of transactions, you will be able to spread your workload more evenly throughout the month-end close process. These small wins do add up to real-time savings. Even saving 30 minutes during each month-end close process will amount to 6 hours over the year. That's 6 hours of time back.
What can be estimated with reliability early?
Although we love everything to be perfect down the cent, sometimes estimations must do. The key to whether to estimate rather than wait for actuals is understanding the nature of the account. Some accounts will fluctuate wildly month on month with no clear driver, but there will also be many accounts that are relatively stable month on month or have clear drivers that can lead to accurate estimations. Think about those bills that come in month after month or your term deposit interest accruals. You may be a few dollars off, but you'll be close enough that no one will know the difference—or, more importantly, no one will care. For example, if your annual leave accrual is off by one day's worth of leave, will it change any decisions that the business makes in the coming month?
What is actually important to your business?
Not all accounts in the general ledger were created equal. While we may cherish every number equally due to our need for perfect balance, our attention and time need to be focused on what information is most important to the business. For example, customer revenue figures will determine future strategy, while asset impairment testing won't change any decisions monthly.
What areas are important will be unique to your company, so there is no one-size-fits-all, but you will notice that the decision-makers at your company will month-on-month focus on certain areas. It is these areas that you need to ensure are 100% correct and therefore should get more of your team's time and effort.
Do you have a clear materiality?
I am not talking about a complex calculation to determine audit materiality, but more of the internal rule within your team on when variances or movements need to be escalated. By giving your team this clear direction on what value is important and what can wait till next month, you are allowing them to spend their time on the most important issues and balances. That $50 variance on a $500k provision for doubtful debts can easily be accepted and investigated after month-end is completed and your team has the time to delve into it fully and determine its cause. This doesn't mean that all decisions should be rigid and formula-driven; you should still encourage your team to use judgment and ask questions. You can even establish different limits and levels of authority for accepting variances, split by either role or account if your team is large enough.
Does your team know what is expected of them?
Clear communication is crucial during month-end. This includes not only who is responsible for preparation and review and when the task is due, but also what level of support is expected for each process and how it needs to be documented. These little details are often taken for granted, but they need to be clearly communicated to avoid issues at crucial times. There's nothing worse than having an awkward conversation when someone thinks they've done great work, only to be told by their manager that it wasn't what they had in mind.
What can you delegate?
Generally, the more senior members of the team have more on their plates, in order to actually be an effective manager tasks must be delegated down
. When delegating work consideration must be given to not only the team members’ current abilities but also their skill gaps.
It is always a hard job to delegate work, as it feels like you are punishing your team by giving them more work. However, the correct level of delegation can help your team grow in their careers by exposing them to new areas of work they have not completed before. When the senior members of a team hold onto all the difficult tasks, they become a bottleneck for the team and deprive junior members of the exposure and experience they need to develop.
It is always a difficult balance to strike, but it will become easier with time, experience, and clear lines of communication in the team.
Do you have clear procedure documentation?
There's nothing glamorous about procedure documents, but they are essential to an efficient team. Our brains can only fit so much information, so we need to document our processes to ensure not only consistency in the work being performed but also to stop the same questions from being asked month after month by the people preparing the work.
Clear procedure documents are also lifesavers when onboarding a new team member. It's a relief to start a new job and discover that everything is documented and outlined, meaning you do not have to ask basic questions about the name of the report you need to run. Procedure documents don't have to be long and overly complicated; they can be as simple as an extra tab in your monthly workbooks with a few screenshots and sentences to guide new users or remind experienced users about the more challenging parts of the process. These documents are also helpful in providing an understanding of why a particular process is being done. It's one thing to follow an instruction manual, but it's another to understand the purpose behind it. Processes can only be improved when they are fully understood by the preparer.
When was the last time you reviewed your month-end processes?
Regularly reviewing your full month-end close process, end to end, is an important job (this can be a relatively simple process with a tool like Easy Month End
). I'm not advocating for an in-depth debrief after each month-end; that will make your team roll their eyes or glaze over completely as they daydream about anything else. However, at least once a year, gather your full team, refill your coffee cups, and review the full month-end process. Look at task descriptions—are they still accurate? Are all the tasks even necessary? Can any tasks be consolidated? Are there tasks that are performed each month that are missing from the month-end close checklist? One of the most important considerations to review is the due dates for each task. Can any tasks be brought forward, or are some unable to be completed until a later date? Shifting due dates out shouldn't be seen as a negative. The goal is to set realistic deadlines and have accurate information about how you're tracking. There's no point in showing a task as overdue if you consistently say every month, "Oh, but it's always overdue because we don't actually get that report until WD4." Your month-end close checklist should reflect reality, not a wish list.
Mix up the work allocation.
Nobody wants to do the exact same process every month for years on end, so work allocations need to be updated where possible. This does not mean changing work allocations monthly, as that will just lead to a reduction in the quality of work performed. However, rotating some of the tasks every six months will benefit the entire team. Fresh eyes on a process will lead to new ideas and efficiencies. It's also an opportunity to update documentation, as performing a process for the first time may reveal just how out-of-date the procedure documents are.
Rotating tasks also helps to spread knowledge throughout the team, ensuring that different team members can cover when someone is either out sick or on leave. It also allows your team to actually take holidays during month ends. Additionally, having more experienced team members occasionally perform simpler tasks increases the likelihood of identifying areas for improvement.
These tips are not an exhaustive list, as every company's month-end close process is different. However, if you follow the above principles, you'll find your month-end close process becoming easier and easier. You may even achieve that elusive goal of not working overtime during month-end close.