Increasingly tough regulations are making an accurate and timely monthly close an even more gruelling process. Prioritising key accounts could help you face the challenge head on and ensure a quicker close.
Reconciliations of the monthly close, are time consuming and tedious, since hordes of accounts needs to be reconciled in no time. So the pressure is on. The fact that all accounts needs to be reconciled, that it has to be done in spite of the lack of time, makes so many just start off right away. Any time spent on reasoning will presumably just put more pressure on.
But there are ways the elephant-sized monthly close can be cut into manageable chunks. It not only saves time, but eases the work and also reduces a lot of the after-work that often piles up for all of us: The too old and unresolved ‘aged unreconciled items’.
There are many good cuts to consider. One is to prioritise which accounts to be reconciled from a risk perspective, another to have reconciliation procedures (in contrast to policies), a third is to consider the quantitative and qualitative skills we should have when reconciling, a forth the process of the Month End Close itself, and etcetera.
- To prioritise which accounts to reconcile first from a key and non-key account perspective is a good thing too.
WHAT is a key account?
- Is it an account with high risk? Well, a ‘key account’ can be an account where the risk of fraud or faults can be high, but it is quite often an account where such risks are low. Instead it is its central position that makes it a key account.
WHICH accounts are a key accounts?
Such accounts can be:
- BANK ACCOUNTS: It is usually the accounts for the bank account and similar accounts. If accounting regarding the non-open transactions for the bank account doesn’t match the statement from the bank, it is usually wrong.
- SUB LEDGER ACCOUNTS: It is usually the sub-ledger accounts, as the accounts receivables or the accounts payable. If the non-open items are not in perfect match with the sub-ledgers which perhaps reside in a separate systems, you are in for trouble later on, both in the monthly close as well as in the accounting at least.
- INDUSTRY DEPENDANT: It is usually dependent upon your industry too. If selling goods is important for you, then the sub-ledger for your stock becomes a key account too.
WHY are they key accounts?
As we finance staff all know, if the sum for a stationary purchase made on the lunch break, is not the same in the account for the bank, versus what the bank statement actually lists, then at least another accounts is wrong too. It could be a profit and loss (P&L) account but also a balance account. If it is a more complex journal entry, then more accounts stand to be wrong. Since the art of accounting is based on the strict logic of maintaining a perfect balance between debits and credits, these small errors are likely to create further problems down the line. Accounting problems that can come back to bite you. If the error stems from sub-ledger accounts, which also may reside in another system than that of the accounting, it becomes an even larger source for problems.
Organising your accounts in this structure means you have clear priorities when it comes to do the reconciliations. By fixing the key accounts first there is less to fix later on and more reliability overall. It may seem unnecessary when you are a smaller company with perhaps only 100 accounts, but you will be glad to have the procedure already in place when you grow into a larger company with over 1,000 accounts. And to be honest, even small companies benefit.
An additional approach which also makes your job easier, could be to reconcile a large key account half way through the month, that is changes in from 1-15th of the month. Then you could reconcile 16-30th at the end – because things are unlikely to change around balances or invoices filed for the beginning half of the month.
Even if these advice does well for monthly close reconciliations in Excel, Excel still won’t solve your problems effectively.
A smarter monthly close
One way to dispense with all of these considerations, risk assessments and the constant pressure to close faster and with greater accuracy can be overcome with the use of specialist financial close software such as Adra Match’s transaction matching software, ACCOUNTS and balance sheet reconciliation software, BALANCER.
These pieces of software work harmoniously to introduce a formalised monthly financial close process, ensuring key accounts are prioritized, reducing risk through automation of transaction matching and account reconciliation. BALANCER’S intuitive dashboard will provide the CFO with the broad overview they need to usher along a more timely close procedure and allow them to drill down to the specifics of each account quickly and easily.
Reduce your risk and gain greater accuracy and control over the period of your monthly close, view this short slideshow to discover more about time-saving balance sheet reconciliation software, BALANCER.
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