A timely and stress-free monthly financial close is about advancing some and postponing other reconciliations out of the tight schedule. And still getting the figures right.
Every monthly close schedule looks the same for many of us. From one day to the next, each task and account is tightly scheduled in, and any disruption of the schedule is a threat. No more items can be squeezed in and no solution is in sight.
But why not escape the mad dash by extending the tight day-to-day-schedule into eternity? Ok, eternity is definitely an impossibility, but what about a year? From the tight schedule of just a few days, is a year not an eternity in comparison?
No! And here’s why…
Consciously delay, and delay even more! – A good best practice
Actually, different accounts require different reconciliation frequencies. Prepaid property tax is only paid once a year and only requires reconciling annually – why not reconcile it once a year instead? Even ticking it off every month does not take long, it takes away valuable time from those tight days. Several other accounts may only need reconciling every six months, every quarter or perhaps even bi-monthly. And if reconciled only then, the workload is reduced.
Scheduling the reconciliations of these non-monthly accounts in a shared calendar can help.
But if this was extending the schedule later in time, you may want to go the other direction too – earlier and before the month end close stress hits you all.
Ahead of the game – a good best practice too
So if month end close leaves you with the worry of (or the experiences of) a backlog, you could do the opposite of delaying: Do it earlier and before the monthly close.
Isn’t this the case with some of your key accounts read about the importance of key and non-key accounts here such as your bank accounts and sub-ledgers, can they not actually be reconciled around the 20th of each month for the period of 1st – 15th?
– If your accounts were risk-rated, any rated high-risk – to be honest – would be better off reconciled every two weeks instead. This reduces not only the burden of each monthly close, but also reduces the risk (read about how to Investigate and analyse your accounts in order to define the risk level for each.
So by extending your tight month end close calendar both earlier in time as later, you are not only following good best practices, you are also escaping the tight monthly close schedule.
Drawbacks, and how to achieve a smarter effective month-end close process
But there are some drawbacks with this best practice too. If an account like ‘prepaid property tax’ actually has one more transaction during the year, it should be reconciled in the assigned period and not left undone until the year is to be closed. This demands that each such delayed account is checked for changes before its delay is accepted.
Why not invest in software that can do all this for you? Specialised financial close software as BALANCER can automate and standardise much of the monthly close procedure, leaving you to focus on higher-level tasks such as reporting and business intelligence.
For instance key and high risk accounts, are prioritised, and other accounts can be set to be prepared bi-monthly, every quarter, six months, and year, just as above – but that is only if criteria isn’t changed. And these accounts will not be forgotten – as the system checks the accounts for changes, and ensures they are prepared the correct set period.
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