End of month closing can be a headache for many businesses. Hours and hours are spent tracking down information, cross checking and correcting that information, comparing records from multiple systems, and trying to reconcile that data with data and records from other, often ad-hoc, systems. For many businesses it is not just a headache, but a serious problem. Below we will outline seven signs that these issues stem from the software being used to manage your business.
Duplicate Data and Manual Entry
Many businesses still operate with multiple systems that all have to be compiled and cross-referenced at the end of every month before being entered into the financial system of choice. Records from Point of Sale, eCommerce, CRM, and payroll systems, among others, have to be manually entered at the end of each month- an inefficient and potentially error-prone process. Similar issues arrive in inventory management- end of month inventory counting often stretching on for days at a time. These drawn-out processes add nothing to the customer’s bottom line, and eat up valuable time and money.
Delayed Financial Reporting
End of month reports take time and effort to compile when being done manually. This means that a full picture of a company’s financial (or other) records is often not available for days or even a week after the month end closing report is complied, leading to intense complications for workers. Many business segments will operate with their own accounting records and spreadsheets in an effort to offset this problem, but that creates new frustrations in the shape of long, frustrating efforts to reconcile any differences in data that occur between their records and the official end of month report.
Trouble with Transactions
Incomplete or error-ridden transactions can weigh down even the most driven teams. Coding, entry, and approval errors happen in the course of day-to-day operation through unavoidable human error. With multiple departments needed to correct and then approve the entries, this process can be a time-sink, which also introduces even more opportunities for errors, creating a vicious cycle. With some companies making hundreds or thousands of transactions a month, this can be a more than full time job.
Manual Adjustments, Accruals, and Allocations
Remaining compliant with GAAP rules is vital- and at the end of the month this means maintaining reporting compliance. Reflecting departmental results is of the upmost importance, and this can often lead to a myriad small corrections. With many companies using manual journal entries to keep track of these adjustments, accruals, and allocations many accountants are forced to create complex spreadsheets just to track their data sources. It is the model of inefficiency.
Lack of Standardized Processes
With the aforementioned constant cross checking of multiple systems, new systems being implemented, new accounts being added in, and other month-to-month challenges most businesses are unable to implement a standard process for end of month closing. Each month presents a new and uniquely challenging set of circumstances that must be overcome. Often members of different teams have to spend valuable time searching for basic data needed to do their jobs, struggling to find it because each team operates with different procedures- increasing job times and frustration.
Reconciling financial accounts at month-end can be a challenge. Bank and credit card balances must be reconciled manually, matching up electronic transfers in and out with existing financial records. Often this can lead to large shifts in cash balances at month-end. As noted above, these transactions often have to be adjusted or approved, and this whole process can be complicated by the fact that source documents and receipts are often stored in a separate system.
Limited Management Insight
While many of the solutions companies turn to meet the basic needs of their workers, though not efficiently, and compliance concerns, they often do not offer managers and leadership the level of visibility and insight required to lead properly. These opaque solutions do not give leadership enough visibility and information to make informed business decisions, often leading to increasingly dire consequences.
These issues all share a simple root cause- the technology powering the business is not equipped to tackle the tasks required for an efficient, low stress end of month closing. In our next article we will look at potential cures for these ills.