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The monthly closing process ends up being a hectic time for many startups - but it doesn’t need to be. It’s also a very common issue with 88% of accounting and finance professionals surveyed by FloQast reporting they were negatively impacted by the pressure to close quickly.
Many startups encounter growing pains as they scale rapidly but have yet to implement formal processes to help streamline complex tasks. Month end accounting involves many departments and has several key tasks that can take a lot of time without taking the time to put some thought into how to best approach them and divide up the work.
Thankfully you can benefit from the wisdom of other small businesses that have already figured out how to reduce the amount of tedious manual processes involved with closing the books and save your finance team from massive headaches.
Here’s how to get started.
Develop and document procedures
It can be a long road to both develop proper standardized procedures and get buy-in from everyone in the organization, but the benefits are truly transformative.
A month end close involves several steps, all of which can be made more efficient by ensuring everyone is on the same page when running them. Documentation also ensures that new team members are able to more quickly get up to speed. The very act of writing out your processes can also help you identify inefficiencies you might not have otherwise spotted, and also allows for easy review by third parties.
Documentation must be:
- Specific: Your documentation should be lacking any ambiguity, and will likely need to go through a few revisions to make sure nothing is missing. Make sure you outline processes in steps, and describe how to perform functions in any relevant software you are using.
- Easy to follow: Keep the language in your documentation as simple as possible, and use visual aids where necessary to help a reader understand.
- Widely distributed: You should make sure all relevant parties have the documentation, and are able to provide input at set points during the year.
If you are looking for an in-depth look at the various steps involved in running a successful month end, be sure to check out our Month End Close Checklist.
Use automation as much as possible
It’s likely no surprise that in our current age much of the tedium of financial reporting can be reduced with automated accounting software. It can also replace the separate documents and spreadsheets used to traditionally perform bookkeeping with a centralized touchpoint for all of your financial data.
Automating processes such as accounts payable and accounts receivable helps streamline income statement and expense account reconciliations by reducing data entry and also fraud via human error. 2020 research by Software path suggests that human error accounts for 41% of inaccuracies in reporting.
Team members that would have been used to simply check log lines or adjust journal entries can instead be used to perform tasks such as variance analysis.
Have a backout schedule and spread out the work
It takes a village to raise a child, and it takes a village to streamline month and year end close. By involving multiple team members and intelligently spreading the work out over the month, you’ll avoid the last minute panic that plagues so many businesses.
Since not every aspect of the month end needs to occur right at the end of the month, it helps to have a standardized backout calendar so that tasks occur in a timely manner. Scheduling software like Asana can make it easy to assign tasks to people, and also make sure the entire team has their eye on the deadlines.
Perform a regular review of procedures
Last but not least, you’ll want to always be getting buy-in from all stakeholders on the processes, and perform a team review on a semi-regular basis. You will want to make sure that you encourage everyone to be brutally honest so you can figure out how to separate the chaff from the wheat.
Some of the questions you should be asking include:
- Can we adjust the timing of the month end close tasks so they’re farther out from the close date?
- Should we be reassigning certain tasks to other team members?
- Can we streamline a process even further by using different tools or methods?
- Can we streamline communication between team members to save time on emails and back and forth?
The goal is that over time the smooth processes you’ve developed will become even smoother.
Need Help With Your Accounting Software Stack and Processes?
As you can see, automated accounting systems can be truly transformative for startups, affecting every level of your operations. They can help make bookkeeping and developing financial statements a breeze, letting you focus on growing your business. Picking the right tools can often be difficult - but a financial expert can help you navigate these choices.
At Punch Financial we specialize in providing high-growth companies with a modern accounting experience. Instead of hiring an in-house accounting team at great expense, you can outsource your strategic needs to a firm with proven results for a fraction of the cost.
Our mission is to help you streamline your back office and to provide you with actionable data and reduce your overhead. Let’s connect to give you a customized quote and free consultation. You have nothing to lose but so much to gain.