As accountants, we have all struggled, at one time or another, with the “Month End Close”.According to “General Ledger Best Practices, 2003 Reference Guide” an exclusive study conducted by the Institute of Management and Administration ("IOMA") for its report on managing the general ledger, the month end close now takes an average of 6.3 days. “Ok, but not great,” says the report.So the question is “what can we do to make it better?” Surprisingly, if we just keep in mind three simple concepts, we can generally be sure of trimming a day or more off the process.
First, be careful of what we are doing.This is the simplest and most basic rule in life, but now and then we all tend to forget it. A simple act of caring for the work that we do can make the whole month end close process go much more smoothly, cleanly, andaccurately.A little care can sometimes help prevent a very small mistake, which then could take other people days to fix.For example, if a staff accountant doing data entry is careful enough to pay attention to the date or to the account numbers, or to double check his or her own work afterwards, that care will surely be of great help in speeding up the month end close process.
The second concept is strict adherence to deadlines to achieve efficiencies.It can take forever to get the month end close done if other departments or even staff accountants themselves do not get their work done on time.From IOMA’s report, here are a couple of testimonials to the effectiveness of becoming stricter with deadlines for other departments:
·“I believe becoming stricter with deadlines for other departments was very helpful; the more timely their information to me, the more timely I can close A/P,” said the accounts payable specialist at a manufacturing company with 250 employees in New York.
·“We set a five-day deadline to close A/R and a 3-day deadline to close A/P.To have deadlines, along with the use of estimates, help us produce financial statements sooner,” said an accounting manager in a private practice firm with 400 employees in Los Angeles.
The third concept is automated journal entries, which can be used as many times as needed without keying the same information over and over.These can save a tremendous amount of time, not to mention cost, and eliminate errors as well.Now, virtually every new accounting software package has a feature to create automated journal entries.
For example, Great Plains has two features: "recurring monthly entry" and "quick journal entry," which can be used for payroll entries, monthly depreciation, allocation of overhead, etc.Quick Books has a feature called memorized transaction, which has the same capabilities.A President of a financial company with 15 employees in Maryland said in IOMA’s report that implementing every automated feature of the existing G/L package, combined with automated payroll entry at the service bureau, took approximately 75 hours of staff time, but resulted in 8-12 hours saved every month.
There are thousands of other ways to improve the month end close process, but the three techniques mentioned above are some of the best and easiest practices to streamline the process.In addition, they are much more cost-efficient than other ways which involve additional investment in technology.
For more information contact Anna Hofmeister at email@example.com