The ultimate goal of the monthly close is to produce timely and accurate financial statements. Moving towards this goal can be tricky, but taking time off to prioritise accounts can help.
As you well know, month-end close is an important process for any company. It provides the information that executives need to make important business decisions. Keeping financial information updated on a regular basis allows for better and quicker business decisions, leading to a more adaptive and responsive business.
There may be hundreds if not thousands of accounts that need to be reconciled during the financial close process, so it makes sense that finance staff will want to get going sooner rather than hesitate over which accounts to tackle first. However, taking a step back, sorting your accounts beforehand into key and non-key, high and low-risk accounts and prioritising is actually a great use of time.
Assigning status to your accounts
Some accounts are outlined as ‘key accounts’ – this means that they affect the status of other accounts, thereby acting as gate-keepers. Accounts will also carry different levels of risk based on several key criteria, broadly separated into high-risk and low-risk. Depending upon how your company decides to define key and risk criteria, some accounts will actually be both.
But how can prioritising financial accounts based on risk and key status help? All financial accounts still have to be reconciled, so the month-end close workload has not actually been reduced…
Making use of the account status
If all you do is assign a key and risk level status to your accounts then it won’t be a great deal of use. However, by prioritising your account reconciliation based on account status, you improve the speed and accuracy of your monthly financial close.
For example, since key accounts affect other accounts, reconciling them early on means there will be fewer faults later when it comes to your other accounts. Similarly, high-risk accounts are those with a high potential for error or fraud, or those accounts that have stricter requirements for compliance. Prioritising these accounts will give you the necessary time to thoroughly check for errors or fraud and still have time to close them before the tightest of regulatory deadlines.
The beauty of prioritisation
- ‘Key account’ prioritisation – ensures they are reconciled first, minimising faults in other accounts and reducing the number of reconciliations that have to be redone due to updates in other accounts.
- ‘High-risk’ prioritisation – ensures accounts are fully reconciled and approved quickly and accurately, with no regulatory deadlines missed.
- Prioritising account reconciliation along these lines can also allow you to partially reconcile some accounts before the month end close. For example, all transactions from the 1st to the 15th could be reconciled on the 20th, helping to cut down on the workload during the busy month end close process.
- Accounts that definitely are not key accounts and have no risks, might not actually need to be reconciled more than once every two months, every quarter, every six months or perhaps only once every year, reducing your overall monthly workload.
So the monthly financial close process can be significantly quicker, easier and hassle-free if prioritised and implemented this way.
Overcoming the key challenges of prioritisation
Conveying the criteria, logic and processes behind prioritisation to everyone involved in the monthly financial close can be a real challenge and take a significant amount of training time. Even after the training it is virtually impossible to track whether every member of staff is using the approach consistently.
Of course, one solution is simply to take the necessary time off from your usual duties to complete each stage of prioritisation and training. However, a more efficient and effective solution is to invest in software that will manage the process for you.
BALANCER makes it easy to assign status and prioritise your accounts. In fact, as accounts are entered into the system for the first time they are given a risk-level, defined as either key or non-key accounts and assigned a reconciliation frequency. Automatic alerts then notify the appropriate members of staff to reconcile each account in the order of priority – so staff have no option but to follow this process.
Overall, balance sheet reconciliation, BALANCER makes prioritisation and reconciliation of your accounts quick, easy and extremely accurate. Just take a look at how straightforward the month end close process is made this short video.
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