Why close monthly accounts by Day 3?

How long does it take you to close each month? If we can shorten the time it takes to prepare monthly management reports, we can get the information to make better decisions sooner. We tie up less time making out-of-date reports and we reduce stress. We have more time to analyse the results and make recommendations.

There’s no use holding up month end because you’re missing a $30 mobile phone bill. On the flip side, if you miss out $30,000 of unbilled work in progress you will skew your results for the month. These larger sums are more material to your report, so how can you make sure that you have this data available?

Keys to Mastering Month End

The keys to mastering your accounting month end are consistency, timing, communication, templates and automation.

Consistency

Regular attention to accounting tasks throughout the month, means less rush at month end.

Invoice your customers when the job is completed. This helps your cashflow too! Contact overdue debtors the day after due date. Reconcile your bank account daily. Follow up on bank queries and errors as they arise.

Record credit card expenses as spending happens rather than waiting for the credit card statement. Remind team to submit their pay records as they go. Make it easy for them to clock in and out, and record against client jobs. Close payroll as soon as wages are prepared.

Timing

Start your month-end cycle before the end of the month.

Count stock and compare to stock records during the month. Hold a WIP (work in progress) meeting before month end to understand project expectations, so you can rapidly determine WIP as soon as the purchase ledger is closed.

Train your suppliers to invoice you by Day 1 or 2 of following month. If you are reliant on supplier information for customer invoices, ask your key suppliers to bill you earlier e.g. 25th instead of 30th. Start your month-end creditors run before the 28th.

Templates and Automation

Save time with templates and automate tasks where possible.

Prepare repeating standard journals for insurance prepayments, supplier accruals, depreciation, interest on finance leases. Create a template for your graphs and monthly report pack. Make notes on variances during the month as they occur, such as production issues.

Communication

Accounting reports are reliant on inputs from other departments. Impress upon production department managers the importance of them providing their inputs on time. You can help them with timely analysis, so they can manage their departments better.

Reports that Matter

Review the financial results and think about the story that it tells. Why do I need to mention this? What needs to be done about it? Write your insights and provide the financial information to support your insights. Consider your audience, by including simple graphs and explanations and by avoiding jargon. If a material change happens after your month end report is prepared but before the next Board meeting, note it in your summary.

Answer key questions: are we profitable? Are we meeting budgets and strategic goals? If sales and gross margin are down, is it a volume or price issue? What are the trends and exceptions?

Month End doesn’t need to be a Drama

The keys to mastering your accounting month end are consistency, timing, communication, templates and automation. Plan your time wisely, focus on material items and key metrics to support your business’s strategic goals. Disclose insights in a report for a non-technical audience to understand and drive better decisions. You can do this and reclaim your evenings.

-       Serena Irving

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, business consultants, tax advisors, trust and business valuation specialists.

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An article like this, which is general in nature, is no substitute for specific accounting and tax advice. If you want more information about the issues in this article, please contact your adviser or the author.