Selecting the best financial management software in 2023: Review these 10 tools
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You would never show up to a race and expect to win first place without ever training. That’s no way to set yourself up for success. You would start a strict training regimen months in advance, outline how many miles you need to run each week, and track your progress along the way.
The same concept can be applied to companies and their financial performance. Every year, organizations have clear revenue targets top of mind. They use historical data, evaluate their current workforce, and create a yearly plan on how they will achieve these objectives. However, just like any trained runner, finance teams don’t just wait until the end of the year to measure their progress, they must track their success little by little to ensure they are right on track.
In fact, part of the role of the finance team is to periodically monitor the performance of the company to ensure they are consistently growing, staying according to plan, and course-correcting as needed. One such approach that allows business owners to gain a holistic overview of their financial activity is by establishing an efficient month-end close process.
This necessary financial reporting process consists of collecting, cleaning, and organizing financial data for a specific closing period to see how the company is performing. While this accounting activity is a staple principle for finance teams, it also tends to be a tedious and time-consuming one. However, due to modern practices and emerging accounting software tools, finance teams now have the resources they need to speed up these processes and lend more time for value-added strategic work.
Below we dive into the ins and outs of month-end reporting and provide a number of tips to help streamline your monthly closing process.
The month-end close process is a practice designed to adjust and verify account balances through monthly reporting. This process helps an organization gain greater insight into its financial health. Many companies make month-end financial reports a requirement for accounting and finance teams as it allows senior management to keep tabs on how the company is performing month over month. Having a collection of these financial statements also helps keep records for budgeting season and year-end close.
By closing the books and reviewing monthly expenses, finance teams can check transactions, reports, journal entries, and other data on a consistent basis while also matching their income and expenses to their financial records. This ensures that receipts, invoices, and all other business transactions have been accounted for and reviewed.
It’s important to also note that the month-end closing process is known to be a slow and manual-intensive practice. Since accounting departments typically need 5 to 10 days to collect and organize their data into a comprehensive report, they are often rushing to finish the project on time, leaving little time for value-added strategic work.
However, when done correctly, the month-end close process provides leadership with greater insight into the overall spend management of the business. This means leadership can identify where the company is overspending or underspending, and better allocate the financial budget to optimize the company’s expenditure.
Because all companies are different and have their own set of unique needs and challenges, there is not a straightforward month-end reporting process for all business owners to follow. However, all companies share the same goals in that they must verify account balances, identify and fix any budget inconsistencies, and create a number of financial statements. Below are the main steps to month-end reporting.
Before you can begin with the analysis, you must first collect all financial information. Accounts receivable, accounts payable, and all transactions for the entire month must be compiled by the finance team before proceeding.
Next, accounting teams must match and verify each transaction for that current month to ensure there are no discrepancies. Reconciling all accounts on the balance sheet allows executive teams to have greater visibility over their cash flows for the current period.
After the bank reconciliations are complete, the next step is to evaluate fixed assets. Fixed assets include items such as equipment, furniture, vehicles, etc. and are typically resources that allow a business to operate and ultimately generate revenue. Finance teams must review the depreciation schedule of these items and recategorize them as expenses.
Once the month-end close has been completed, the final step is to prepare the financial statements. The month-end financial statements that must be created include:
The last step is to analyze the results from the previous month. In this step, typically someone in higher management will conduct another overview to ensure there are no errors within the reports. At this stage, the reviewer is looking for consistency and accuracy before closing the month-end process.
After reviewing the accounting procedures that must take place, it’s clear to see how these steps can become taxing for any finance team to complete on time. Here are a few ways you and your team can improve your month-end close process.
Automating processes is one of the best ways to reduce the amount of work required to close the books. By automating monthly bookkeeping tasks, finance professionals can free up time for more strategic activities like analyzing trends and improving operations.
Today, there are many automation tools that allow finance teams to completely automate manual tasks commonly associated with the month-end close process. Not only does this improve data accuracy and speed, but it also provides leadership with faster insights to make more strategic business decisions.
One of the biggest roadblocks is the slow manual processes involved in data collection. Finance teams end up spending a considerable amount of time collecting and consolidating data from a variety of tools to then input that information into spreadsheets.
By the time they have collected the data, it may already be outdated. To help streamline the process, consider implementing an automation solution that instantly collects data into a centralized space. From there, everyone involved in the month-end close process can align and access what data directly from a single source of truth.
One of the most effective ways to improve the month-close process is to increase efficiency. By having a clear process in place, finance functions will be able to assign ownership, set deadlines, and deliver accurate reports month over month. With the help of automation technology, finance teams can access all the data they need right at their fingertips.
Not only does having financial planning and analysis software help speed up the month-end close process, but it also improves efficiencies across the entire organization.
Another way to improve the month-end close is by accessing real-time data. By using up-to-date information, you will be able to quickly identify any issues that may arise during the month-end close. This data can then be used to correct any mistakes that surface during the process.
For example, if an error occurs when preparing the income statement, the finance team can use the latest information to determine which line item caused the issue. Once corrected, the report can be rerun without delay.
In order to successfully close the books, it is vital to collaborate with all budget owners. Finance teams should communicate with other departments so they understand the intricacies of the business. Having a well-defined plan in place ensures everyone knows exactly what needs to be done and when to hit deadlines on time.
As a finance professional, you have enough on your plate as it is. You need to be able to depend on accurate accounting data if you are going to create detailed reports that will support strategic decision-making. To help eliminate manual data entry and repetitive tasks, consider implementing financial planning and analysis software that will be able to revamp your entire monthly accounting processes.
By consolidating data into a centralized solution, you no longer have to worry about data inaccuracies or spending hours on manual work. With this advanced technology, you and your finance team now have the power to create your month-end reports in a fraction of the time it would typically take you.
Considering adding a strategic tool to your finance tech stack? Contact our team at Abacum today to find out how to get started.
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