If the Month-End Close Ain’t Broke, Don’t Fix It


This article originally appeared in SAP Digitalist.

Here’s the thing: the month-end close is broken.

In the blog Why Did The Accountant Cross the Road, the idea of doing things the way they’ve always been done was put out to pasture. “Let’s not cross the road just because we did it last year.” Or you might say, let’s build new roads, new ways to improve the timeliness and accuracy of the close.

Well, building new roads is hard. And the best path forward starts with fixing the potholes.

That’s the idea behind Ventana Research’s advice to adopt a continuous improvement approach: don’t think of a fictitious end state as the goal. The goal itself is continuous improvement. Success means always adapting, innovating, and improving.

Continuous Accounting is not the destination, but a journey yielding continuous improvement in the quality, accuracy, and efficiency of accounting operations. But beginning is always the hardest, so here are six steps to get you started.

Step 1: Ask Your Staff Accountants

What are your biggest challenges and most painful bottlenecks? Do you even know?

Ask your staff accountants. Those deepest in the weeds of manual effort are often the ones with the best ideas about how to streamline existing processes.

In fact, many of the procedures best suited for the first steps of your journey are often the most manual and risky – and the easiest to improve and automate.

Step 2: Pick the Low-Hanging Fruit

It’s productive to imagine your ideal monthly close process by playing the “what if” game. But quick wins and time to value come from finding and picking the low-hanging fruit that consumes too much time for no good reason (see Step 1).

How many zero-balance accounts are you reconciling every month? Are you manually matching and reconciling bank account transactions to find exceptions? Automate this so you can focus only on the exceptions.

Step 3: Optimize Before Automating

Split batch processes into smaller components, then schedule those components more often and embed them within daily activities. When your processes are improved and standardized, automate wherever possible.

One example is a prepaid account. Do you book a transaction on the first day of the month every period but save the associated account reconciliation for the end of the month? When are you doing your flux analysis?

Automate analysis weekly and monthly–during the close–instead of next month, quarter, or year.

Step 4: Monitor Results Frequently

Leverage continuous activity to constantly review output, and investigate alerts from flux analysis, exceptions, and anomalies.

By moving away from manual spreadsheet analysis of transactions, you can focus solely on exceptions and anomalies and make adjustments as needed in real time.

By closely monitoring your financial close and managing it by exceptions, you will catch and resolve issues before they cause problems. This will naturally spread month-end close work earlier across the period.

Step 5: Review Outcomes

On a monthly or quarterly basis, review the outcomes of your Continuous Accounting journey. Discover macro trends and identify process and controls gaps. Compare successes versus original objectives – what worked, and what didn’t?

In The Value of Continuous Accounting for Business, Ventana Research found “a correlation between the frequency of process reviews and achievement of better results: 67% of companies that review their close process monthly said they were able to shorten their close, compared to 50% that review quarterly and just 10% annually.”

Step 6: Rinse & Repeat

Combining the knowledge gleaned from the review stage, rinse and repeat. Return to Step 1 and focus on a more challenging tier of improvements and the more risky and critical gaps. Are there new problems uncovered in light of the freed time? There’s the beginning of your next round of improvements.

Adapt, or…

You’ve heard it a thousand times, and you feel it every day: you need to do more with less. Beyond the risks associated with out-of-date accounting and finance practices, the increasingly complex nature of global business cycles means that companies that are slow to modernize their accounting operations are at a competitive disadvantage.

“The one constant in today’s business world is relentless change,” says Mario Spanicciati, BlackLine’s chief strategy officer. “Survival is determined by an organization’s ability to adapt and evolve, and success is granted to those who define the competitive advantage.”

You can make things better by embracing a culture of continuous improvement. The best-performing finance teams know that success means always adapting, innovating, and improving. This shouldn’t be discouraging. It’s inspiring.

Every day can be better than the last, and you’ll hit a lot fewer bumps in the road to closing the books.

Read this ebook for six powerful steps that will help your organization begin their Continuous Accounting journey.