Closing the books accurately and on time each month is crucial if you want to understand how your business is performing, but it’s often a task that many companies, including startups and businesses experiencing rapid transformation, struggle with.
Whether you’re growing a relatively new business or have been struggling to manage your finances for a while, interruptions to closing your books at the end of the month can cause all kinds of headaches. But with the right approach, it’s possible to build a repeatable, scalable system that ensures your business can efficiently close its books each month, giving leaders the insights they need to make important decisions.
Closing the books requires collaborative systems that evolve with your business. With the right strategy in place, your business can implement proven systems and develop KPIs that will deliver clear, accurate insights into your financial performance. Doing so doesn’t just shine a light on how your business is performing, it also helps you to make more informed decisions that drive real progress towards your financial goals.
At G-Squared Partners, our team provides outsourced bookkeeping, accounting, and CFO services to businesses across a diverse range of industries. Our team takes a customized approach to every client, helping you create systems and processes that work for your business. Schedule a consultation today to learn more about how we can support your business.
Month-End Close, Reporting Actuals, Reconciliation…What Does It All Mean?
Every month, businesses rack up hundreds, thousands, if not millions of transactions. Depending on the nature of the business, these might include purchase orders, equipment lease dues, employee 401k contributions, and much more – the variety is seemingly endless.
Finalizing and reconciling all of these transactions on a monthly basis is the foundation of the month-end process. Accountants and bookkeepers will review and record adjusting journal entries, reconcile accounts (verifying that the company’s internal records match bank statements, credit cards, etc.), and produce financial statements that summarize this information.
While you may have a detailed forecast of where you expect to allocate your budget throughout the year, the month-end close provides you with the real picture of your actuals – the amount your business actually recorded as revenues and expenses. This information helps business leaders understand how their financial performance is tracking, identify trends, and take action to improve financial performance.
Closing the books accurately and on time is non-negotiable for succeeding long-term. From managing your accounts receivable to making sure your employees and vendors are paid on time, the month-end closing process is critical to operating your business in good faith.
Common Blockers When Trying to Close the Books
The accounting cycle is a team effort requiring diligent record-keeping and reporting every day. When accounting teams struggle to close their books accurately and on time each month, the reason often comes down to the lack of the right people, processes, or technologies.
Here are the most common reasons why companies that we work with have struggled to close the books in the past.
A Lack of Processes
We’re currently in the midst of a severe talent shortage in the accounting industry, meaning talented financial professionals are expensive and hard to come by. Plus, if you’re just starting up your company and are busy securing your first customers, suppliers, and employees, it’s often easier for leaders to keep track of the books themselves - not to mention more cost-effective.
In the early stages of growth, this approach can be fine, but once a business reaches a certain growth stage, its lack of financial infrastructure can severely hold it back. Perhaps you’re seeking more funding, but don’t have a clear understanding of your burn rate. Or maybe you keep unexpectedly running into liquidity issues when it’s time to run payroll. These issues, and many others, stem from a lack of financial processes.
A strong accounting team brings diligent attention to collecting and reporting actuals for your month-end close. Alongside the right team, leadership can implement a few best practices to build better relationships with accounting that will ensure your business makes informed progress toward its financial goals.
Processes Have Become Unsustainable
Businesses in rapidly growing markets often have teams adapting on-the-fly to new challenges and decisions. That might make sense for product or sales, but when it comes to finance, a different approach is required. If chaos ensues as everyone scrambles to figure out why their actuals are so different from the budget every month, your business needs a better approach.
A good accounting team doesn’t wait until the end of the month to run the month-end close process. Instead, they’re constantly in the loop, ensuring all transactions are recorded consistently and that business critical KPIs are tracked to support your business in making long-term decisions.
If you lack the resources to fix these issues yourself, working with an outsourced accounting firm is a great option to tackle your broken processes. With the right support, businesses can integrate strong bookkeeping systems and adopt automation technologies that ensure they always close the books in a timely, accurate manner.
A Lack of Support from Leadership
Failing to close the books can be a vicious circle. If the records your team submits are late or incomplete, it’s impossible for leaders to have trust in your numbers. The lack of clarity causes leadership to become frustrated with their accounting department and to become tempted to cut resources.
Breaking this cycle of failure is vital. There’s no question that a strong month-end close process requires the support of leadership. It’s a change your business will have to make as it grows: closing the books each month is considered a best practice under GAAP and is key to ensuring the accuracy of a business’s financial records.
Closing the books accurately, and on time, each month is an investment worth making. It ensures your business remains in compliance with debt covenants and other financial reporting standards, and gives leadership an objective scorecard of how the business is trending. Hiring an experienced financial leader, such as an outsourced CFO, to serve as an advocate for this process can be the inflection point many businesses need to improve their processes.
G-Squared Partners: Outsourced Accounting Services
The month-end close is key to lasting success in business, empowering leaders with accurate financial data that serves as the foundation for decision-making. Developing robust, repeatable financial processes is integral in enabling any business to reach its goals.
If you’re not ready to invest in building out an in-house accounting team, consider working with G-Squared Partners. As an outsourced accounting firm, we’ve worked with hundreds of companies from early-stage, technology startups to VC-backed transformations. We cater our suite of accounting, bookkeeping, and outsourced CFO services to meet the unique needs of your business.
Contact G-Squared Partners today to learn more about outsourced bookkeeping, accounting, and strategic advisory.
