9 reasons why your month-end close is challenging

Prophix ImageProphix Jun 20, 2024, 8:00:00 AM

Mastering your month-end close can feel like an impossible goal, but it doesn't have to be. In this blog, we’ll look at the common challenges that complicate the process and share actionable month-end close best practices to help you overcome them.

From standardization issues to data security concerns, you’ll learn about practical solutions that will simplify your close and enhance collaboration. Ready to transform your month-end?

Why does month-end close take so long?

Spending hours, if not days or weeks, collecting data, reconciling transactions, and preparing reports is not how most finance leaders want to define their month-end. Yet, month-end close remains one of the most challenging finance processes – with 25% of organizations taking 10 or more days to close their books. So, why does month-end take so long, and what can you do about it?

Let’s look at the ideal timeline for month-end close, including best practices and challenges, and finally, how to streamline your processes.

How long should month-end close take?

Generally speaking, your month-end close should take between 5-10 days. However, the length of your close will depend on many factors, including:

  • The size of your company: Larger companies often have more complex financial data and processes, which can extend your close timeline.
  • The quality and organization of your data: High-quality, well-organized data can significantly speed up the close process by reducing time spent on corrections and reconciliations.
  • Your industry: Certain industries, such as financial services or manufacturing, may have more intricate reporting requirements that demand additional time.
  • The volume of transactions in a given month: A higher volume of transactions typically requires more time for validation and reconciliation.
  • Your accounting systems: Advanced, integrated accounting systems can streamline processes and reduce the close time.
  • The number of stakeholders and investors involved in the process: More stakeholders can mean more reviews and approvals, lengthening the close timeline.

By understanding these variables, you can better gauge an appropriate timeframe for your month-end close and implement strategies to optimize efficiency.

Top 9 reasons why month-end close is challenging

Month-end close can be time-consuming for many reasons, but proven techniques can transform it from a chaotic mess to a calm process. Let’s look at nine reasons why your financial close is challenging, and how you can implement month-end close best practices to simplify it.H2:

1. A lack of standardization → Automate processes

Month-end close challenge
One of the most common challenges with month-end close is a lack of standardization across data, processes, and reports. For non-finance contributors, it can be difficult to understand what you need to contribute and how. For finance leaders, it can be time-consuming to sort through data that’s not formatted correctly or is missing key values. This lack of standardization can lead to increased error rates, longer reconciliation times, and inefficiencies that delay the overall close process.

Month-end close best practice
Adopting technology, like a financial performance platform, can help standardize your month-end close processes by setting up automated workflows, creating data entry templates, and automatically distributing reports. These tools ensure consistency across all submissions, reduce errors, and speed up the reconciliation process.

2. Discrepancies in data → Establish a single version of the truth

Month-end close challenge
Larger organizations need to collect significantly more data for month-end close than smaller companies. And often, this data comes from many different sources, including your ERP, spreadsheets, CRM, and invoices. As a result, your finance team has to track down missing figures, double-check submitted data, and liaise with other departments. Data discrepancies can severely impact the accuracy of financial reporting and decision-making, as resolving these issues often requires extensive back-and-forth communication, further delaying the close process.

Month-end close best practice
Establishing a single version of truth with finance technology can help ensure everyone is working from the same set of data, preventing errors from manual data entry and compilation. By consolidating data into one unified platform, you can minimize discrepancies and streamline the close process.

3. Poor communication → Aligned teams

Month-end close challenge
Chasing down other departments and trying to find the necessary data can add a significant amount of time to your month-end close. Poor communication can also lead to delays, inaccuracies, and increased frustration among team members. For instance, if a department misunderstands the data requirements or fails to respond promptly to the finance team's requests, it can result in missing or incorrect data submissions. This misalignment not only extends the close process but also increases the likelihood of errors that require further corrections.

Month-end close best practice
Gathering everyone for a pre-close meeting can help set expectations, establish responsibilities, and address any issues that came up during your last close. It’s also a good idea to set up a post-close meeting for your stakeholders to discuss findings, and see how you’re measuring up to your monthly, quarterly, and yearly goals. Additionally, implementing a centralized communication platform can streamline information sharing and ensure everyone stays aligned throughout the process.

4. Delays due to adjustments → Automated account reconciliations

Month-end close challenge
Reviewing data for your month-end close is a time-sensitive process that depends on the necessary data being readily available. But when there’s a delay in collecting, validating, or adjusting your data, it can significantly extend your month-end close timeline. Delays often arise from the need to correct errors, update estimates, or await approvals, which push back the close date.

Month-end close best practice
With finance technology, like a financial performance platform, you can automate the account reconciliation process with reconciliation templates, transparent controls, robust tracking, integrated break support, and unified close performance analysis. Automating these tasks reduces the potential for delays and helps ensure a timely and accurate close.

5. Manual data entry → Streamlined data collection

Month-end close challenge
Manual data entry is a significant bottleneck in the month-end close process. Finance teams often spend hours inputting and verifying data, which not only increases the risk of errors but also consumes valuable time that could be spent on more strategic tasks. Additionally, manual processes can lead to inconsistencies and discrepancies that require further investigation and correction.

Month-end close best practice
Implementing technology that streamlines data collection can drastically reduce the need for manual data entry. Using tools like data integration or automated data capture solutions can ensure that data from various sources is automatically collected, validated, and uploaded into your financial systems, thus saving time and reducing errors.

6. Inconsistent reporting → Standardized reporting templates

Month-end close challenge
Inconsistent reporting formats across departments can complicate the month-end close process. When different teams submit reports in various formats, it becomes challenging to consolidate data efficiently. This inconsistency can lead to misunderstandings, errors, and delays as finance teams work to harmonize the disparate reports into a unified format.

Month-end close best practice
Standardizing reporting templates can alleviate this issue. By using a financial performance platform that provides customizable reporting templates, organizations can ensure that all departments submit their reports in a consistent format. This standardization simplifies data consolidation, improves accuracy, and speeds up the month-end close.

7. Lack of real-time data → Improved real-time analytics

Month-end close challenge
The lack of real-time data can hinder the month-end close process. Finance teams often rely on outdated or incomplete data, leading to inaccurate financial statements and delayed decision-making. This lag can prevent organizations from responding promptly to financial trends or issues that arise during the close period.

Month-end close best practice
Adopting finance technology that offers real-time data analytics can transform the month-end close process. A financial performance platform that integrates real-time data feeds from various sources enables finance teams to access up-to-date information continuously. This real-time visibility allows for more accurate financial reporting and quicker responses to any discrepancies or anomalies.

8. Data security concerns → Enhanced data protection

Month-end close challenge
Ensuring data security can be a significant challenge during the month-end close process. With sensitive financial information being shared across various departments and external systems, there is an increased risk of data breaches or unauthorized access. This concern is heightened when using outdated or insecure methods for data transfer and storage, which can lead to compliance issues and potential financial losses.

Month-end close best practice
Implement robust security measures by leveraging finance technology with advanced data protection features. A financial performance platform can offer encryption, secure data transfer protocols, and access controls to protect sensitive information. Additionally, regular security audits and employee training on data security best practices can further safeguard your financial data, ensuring compliance and reducing the risk of breaches.

9. Changing regulatory requirements → Compliance automation

Month-end close challenge
Navigating ever-changing regulatory requirements can be a significant hurdle during the month-end close. Keeping up with new rules and ensuring that financial reports comply can be time-consuming and complex. This constant need for updates and adjustments can delay the close process and increase the risk of non-compliance.

Month-end close best practice
Implementing compliance automation tools within your financial performance platform can help manage and adapt to regulatory changes seamlessly. These tools automatically update compliance protocols, generate necessary reports, and ensure that all data adheres to current regulations, reducing the time and effort required for manual compliance checks.

Top 9 reasons why month end close is challenging

How to streamline month-end close

It’s a month-end close best practice to use finance technology, like a financial performance platform, to expedite data collection and streamline your close processes.

This is where Prophix One™, a Financial Performance Platform comes in!

Prophix One can integrate your general ledger, balances, and trial balance transactions into your account reconciliation process, expediating data collection and analysis. Another benefit to Prophix One is the ability to drill across from a balance sheet into your account reconciliation details, so you can audit your results and understand where your numbers come from and what they’re comprised of.

Workflows can streamline your month-end close by standardizing processes from close all the way through reporting and planning, giving you a view of how you’re progressing at any point in time.

You can also add attachments and files to each account reconciliation supporting item or adjustment level, so everyone is on the same page. Import accounts from a flat file or via data integration, which will give you more visibility into your trial balances.

And with a built-in audit log, you can track every single change in the system. In addition, Prophix One gives you the ability to export your entire close by entity in Excel for your auditors. Opening your trail balance report will give you an overview of your trail balance, all of your GL balances, supporting item totals, adjustment items, the differences, the statuses, and the workflow time stamps to see where you are in the process.

Another month-end best practice is to use Prophix One’s high-level of security to ensure that stakeholders in your organization only have access to the data they need for their jobs.

We’ve also compiled a comprehensive month-end checklist to help you navigate all the steps in the process, from data collection to audits.

Conclusion: Expedite your month-end close with Prophix One™

Implementing effective month-end close best practices can transform your month-end close process from a stressful chore into a streamlined operation.

By addressing common challenges like data discrepancies, poor communication, and security concerns, you can improve accuracy, efficiency, and collaboration.

Ready to explore the platform you need to expedite your month-end close? Check out The Ultimate Financial Performance Platform Buyer’s Guide.

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