Tips to Make Your Month-End Close Processes Easier
Month-end processes are often a source of stress for finance teams. Many organizations find month-end processes challenging, which is why it is important to put processes in place early and consistently.
If that sounds like your month end, you’re not alone – many businesses will face similar challenges. While most accounting departments dread the end of the month, an organized team can make things much easier on themselves at this time of the year. Here are some tips to reduce stress and streamline your month-end close processes.
What Are the Most Common Month-End Processes?
Month-end processes are standard parts of the business cycle. You may need to process payments, collect receivables, make payroll, or do regulatory filings at the end of each month. These tasks are often automated in modern businesses but can still be time-consuming and tedious for employees to complete.
- Collect payments: Businesses must collect monthly payments from customers if they want to stay fluid. This process can be automated, but it should also have enough human oversight to ensure that everything is current and no payments slip through the cracks.
- Write checks: This is often the most tedious process in any business. A lot goes into writing a check, from calculating the proper amount to getting each check sent out appropriately.
- Process invoices: Processing invoices involves reading invoices and making sure they are accurate before you pay them. Then there are calculating payment amounts, which can be a challenge for many small business owners who aren’t used to doing it manually.
- Pay taxes: Taxes are a hassle every year, no matter how well organized you are. You need to calculate sales tax and ensure all the correct forms have been filed. You also need to track sales receipts to know where your money is going and whether it’s being spent appropriately.
- Process credit card payments: When you accept credit cards, it’s important to process them quickly and accurately so that you don’t lose any money. In addition to earning more money from quickly processing these cards, quick and accurate processing of card transactions can help you avoid costly chargebacks. A chargeback happens when a card customer disputes a purchase and gets their money back. It can be expensive for businesses to deal with chargebacks, especially if they are accused of fraud. It’s, therefore, important to keep careful records of all your transactions, monitor your risk, and stay above the minimum transaction amounts for each card type.
Organize Your Data
There are many examples of disorganization leading to errors and delays in month-end processes. If you can’t find something, you could be heading towards mistakes, such as incorrect calculations, incorrect payment amounts, and misapplied bank credits.
If you are experiencing issues, you may need to re-examine how you store data to find what you need when needed quickly. Organize your data to ensure that information is easily accessible and can be understood.
There are many ways of organizing data, so choose an approach that suits your organization. Some standard methods include data tables, dictionaries, and architecture models. Data tables are simple tables that show how data is used. Data dictionaries are more prescriptive and indicate what data should look like. Data architecture models show how information is delivered and consumed.
Automate Processes Where You Can
Many month-end processes can be automated to save time and reduce human error. For example, you might have a process to check your customers’ payment terms. This process might involve a person looking up the details for each customer.
You could instead automate this process and use data tables to select the customer details from the data table and have the system look up the payment terms automatically. You could use automation to schedule the payment or even generate the payment and send it to the customer.
It could save significant time and effort in areas where automation is available. Some processes may be more challenging to automate. If so, consider if they can be simplified. A more streamlined process will be easier to automate and more efficient when completed manually.
Use Checklists to Ensure Nothing Gets Missed
As part of the process of ensuring all data is correct, you might need to check each account. This could be a time-consuming task if you have a large number of accounts. A more efficient approach is to use checklists to ensure you have checked each account correctly.
Checklists can also show that every step in the month-end process has been completed and is accurate. This can be particularly useful in team environments. Using checklists for account reconciliations can demonstrate the company’s level of due diligence, which can be particularly important if your organization is audited.
Establish Clear Processes and Timing
If each team member has clearly defined responsibilities, they will know what to do and when to do it, reducing confusion and allowing everyone to focus on their own tasks. For example, you might have one person responsible for checking the payment terms for all accounts within a particular time frame. Another person could be responsible for monitoring payment dates for these accounts and bringing any issues to the attention of other team members.
It is also essential to ensure that all team members are aware of the company’s payment terms. You might have team members who are unaware of the payment terms but who are responsible for checking accounts.
Define a Clearing Date and Vendor Date
A common cause of issues at the end of the month is accounts that are inadvertently paid too early. This typically happens due to a misunderstanding of the company’s payment terms. For example, if your customers generally pay 30 days after the invoice date, but your payment terms are net 10 days, you must ensure that your accounts are only paid 10 days after the invoice date.
Some organizations use the last day of the month as the clearing date. However, this is not always ideal because it may mean you must wait until the next month to pay some of your essential suppliers. A better approach is to use the first date on which you plan to pay suppliers each month as the vendor date. This will give you a more realistic time frame for paying suppliers.
Lock Down Permissions
You might have been using your month-end processes for years with no issues. But, as your business grows and the team changes, it can be easy for someone to make a change to a process inadvertently, potentially resulting in a process that no longer works properly.
It is essential to lock down the team’s permissions to prevent errors from happening. It is even more important to do so at the end of the month when processes are more tightly controlled. Permissions are often set up based on the functions and roles of team members. You may want people in accounting to have complete control over payment terms and dates, while other team members may only need read-only access.
Protea Financial Can Help Keep Your Month-End Processes Going Smoothly
Month-end processes can be challenging, particularly for large teams or organizations with many customers. However, if you take the time to prepare and put processes in place, they can be much easier to manage.
Organize your data, automate where you can, use checklists for account reconciliations, and establish clear processes. These simple steps can help reduce the stress and errors associated with the end of the month.
If you simply want to hand over the month-end responsibilities, reach out to us here at Protea Financial. We will do whatever we can to help make your business successful.
Protea Financial Can Help Make Your Month-End Close Processes Easier
If you need help to make your month-end close processes easier, then please reach out to us here at Protea Financial. Our experts can help guide you to a smoother month-end close so you can focus on the next step for your business.