4 Signals Your Financial Close Needs Help

Companies close their books in 2022 to start the new year. However, not all closing periods go smoothly. Accounting professionals seldom look forward to completing the books, whether you're closing a quarter or a year.

Financial teams are often required to reconcile transactions and finalize invoices. This task can often lead to late nights and long hours.

Sometimes it can be difficult to admit there are problems with your financial closing. They are often completed with all flaws because "this is how we've always done it here." The company's employees are open to the inconveniences, mistakes, and headaches associated with closing.

A new year brings new goals and opportunities for improvement. These could be signs that a company's financial closing process is not working correctly and indicate areas for improvement.

Inadequacy of documentation

The key to a smooth closing is a clear set of steps. These steps must be done correctly, and there should be a timeline. Unfortunately, it is difficult to determine if the financial closing process is going smoothly.

Organizations often have a monthly, quarterly, or annual closing process that isn't well documented. As a manager or business owner, you should not assume that your team is proficient in closing a deal from start to finish. It is easy to overlook essential tasks, perform incorrectly, or do things in an improper order without a documented process.

Automation is lacking

A company's accounting department is the master record keeper and is responsible for recording all financial transactions. Unfortunately, this record-keeping process is often manual and leaves room for accounting mistakes.

Many organizations still use manual processes for closing financial transactions, regardless of how simple they can be automated. However, automating financial closings and other business areas can increase efficiency, reduce delays, faster reporting, and help with the timing and effectiveness of business decisions.

Spreadsheets are too dependent

Spreadsheets have been a popular choice for many companies in organizing and reporting data. However, it is an outdated process and leaves much room for error.

All of the manual steps, including data import, formula input, and data export from spreadsheets, are manual. The data must then be manually transferred to the company's accounting software. This adds unnecessary risk to the financial close.

Although spreadsheets can be helpful, they shouldn't be used for managing critical data. These spreadsheets can make mistakes and even be altered accidentally, causing a lot of accounting errors. Using accounting software that handles everything can reduce reliance on spreadsheets. This will make it easier to gather information and increase trust among managers and owners.

Distribution of Data

Many departments are involved in a financial close. For example, the accounting team might need information from sales and project management teams. If the information isn't easily accessible, delays could result in significant delays as each department waits to get it during the financial close.

It is much easier for accounting departments to compile the data they need during closing periods if all of their operations and departments are stored in one location.

Utilizing a system like XERO or QBO gives companies the ability to accelerate the financial close process by helping ensure tasks are completed accurately and on time, meaning less stress and headaches for you.

If you have questions on setting up an end-of-year close contact our helpful controllers at basis365.com