As companies close their books from 2021 and start the new year, not every closing period goes smooth and sometimes can be done better. Whether you are closing a month, quarter, or year, closing the books is an essential activity that accounting professionals rarely look forward to.
This task puts pressure on financial teams to finalize invoices, collect payments, pay bills, reconcile transactions, and more. It often leads to long hours and some late nights to get it all wrapped up.
It's not always easy to sit back and admit that there may be issues with your financial closing process. Oftentimes, they are completed, flaws and all, because "this is how it's always been done here". People within the company accept the delays, errors, and other headaches that come with the closing process.
With a new year, comes new goals and improvements. These signs could be red flags that indicate a company's financial close process is broken and highlight areas of improvement for your 2022 financial closes.
Lack of Documentation
A smooth closing process starts with a set of clearly defined steps, the order said steps should be performed in, and a thorough timeline for completing them. Without a structure like this, it will be difficult to know if a financial close is running smoothly and difficult to identify problems with the overall process.
Many times, organizations have a yearly, quarterly, and monthly closing process that is not well documented. Never assume as a business owner or manager that the team knows how to handle a close from start to finish and does not need any sort of documentation. Without a clear documented process, it allows for more tasks to be overlooked, things completed out of order or performed incorrectly.
Lack of Automation
A company's accounting department is the master record keeper for the business and is responsible for ensuring that all financial transactions are properly recorded. Oftentimes, this record-keeping is a manual process that leaves room for accounting errors.
In many organizations, the financial closing process also remains a manual process, despite how easy it can be to automate. Switching to automated processes in financial closings and other areas of the business adds greater efficiency, fewer delays, quicker reporting, and more. It can even aid in the timing and effectiveness of business decisions.
Relying Heavily on Spreadsheets
Spreadsheets are a long-time favorite for many companies when it comes to organizing data, reporting data, and more. However, it is a very outdated process that allows a large amount of room for error on the table.
Everything from importing data, inputting formulas, and exporting data from spreadsheets is a manual process. From there, the data has to be manually moved to the company's accounting software - an extra step that adds needless risk to the financial close process.
While spreadsheets are useful tools, they should not be used to manage critical data. They're insecure to a point that mistakes can be entered and records can be accidentally modified and cause a slew of accounting errors. Implementing an accounting software that handles everything from start to finish can eliminate the reliance on spreadsheets a company may have. It will make gathering information much easier and give owners and managers a higher level of trust in the numbers they are presented.
A financial close involves many departments. The accounting team may need to collect information from sales teams, project management teams, and more. Waiting to receive this information from each department during the time crunch of a financial close could cause major delays if the information is not easily accessible.
Having a company's data from various departments and operations stored in a central location makes it much easier for an accounting department to compile what they need during a closing period.
How A System Like NetSuite Can Help
NetSuite financial management and accounting software help companies with automating the financial close process. With the NetSuite software, companies can stop relying on spreadsheets as well to record data and provide reports.
Finally, NetSuite's unified business management platform integrates accounting, sales, shipping, and other departments, to provide companies with a single source of data that eliminates the frustrations and delays caused by storing information across various software and in manual formats.
Utilizing a system like NetSuite gives companies the ability to accelerate the financial close process by helping ensure tasks are completed accurately and on time.