Finance Industry

How small & early-stage companies can master month-end close

The month-end close process is essential to staying on top of your company finances. But for small and early-stage companies, it can also be a massive chore. Resource-strapped accounting teams can struggle to systematically confirm and reconcile financial records every month, which means spending hours chasing down expense reports and staring at spreadsheets.

But failing to complete robust month-end closes can lower the financial credibility of a company and may hinder potential investments, partnerships, or even merger and acquisition opportunities. So, companies of every size and stage need to establish efficient and reliable month-end processes as early as possible.

Robert Gregory (Director of Accounting) and Amber Welch (Senior Manager) from Graphite Financial joined Tanya Firdman (Senior Manager at Teampay) to discuss how small and early-stage companies can create effective month-end close processes.

1. Automate invoice tracking and spend management

Finance teams need timely financial data, bills, and invoices to close month-end processes. But employees, department heads, vendors, and other external stakeholders don’t always submit this financial data on time, unintentionally delaying month-end close.

“You’re always waiting to get information from someone outside the accounting department. For example, you may need information on what accrual needs to be made or what this invoice is for,” says Gregory (who speaks from four decades of experience leading accounting teams). “Not getting timely information is one of the biggest pain points financial professionals face.”

Part of the problem is that small and early-stage teams don’t take the time to define purchase orders, expense management, and invoicing processes. “No one wants to sit and write standard operating processes (SOPs). Because startups just don’t have the time or resources to cement these types of housekeeping things,” says Welch. “But sorting them can save time in the long run by preventing things from falling through the cracks and avoiding lengthy cleanups that are likely to occur.”

So, instead of constantly playing catch-up, finance teams need automated tools that track invoices and purchases as they happen. “Wherever you can, try to automate,” Gregory says. “Automate things like expense reports and purchase orders. Those things can really help you get past some of the major month-end close pain points.”

“My biggest piece of advice is to use process improvements and automate as much as possible.”

Robert Gregory, Director of Accounting, Graphite Financial

 Firdman agrees with Gregory. But she also emphasizes the need to have well-thought-out processes in place. She says, “I agree with Robert that automating processes is important. But teams also need to know when automation needs to take place. Because if you don’t have a sound process in place and you’re just trying to fix it with technology, that’s not going to work.”

2. Establish effective communication and rapport with stakeholders

With month-end close deadlines looming large, finance teams can overlook the importance of communicating with key stakeholders. But finance teams need to build good relationships and rapport with both internal and external stakeholders, so they understand why finance deadlines are important.

“You need to have good relationships with people outside your accounting team, who provide expense receipts or invoices. And it’s really important to maintain good levels of communication within the accounting team.”

Amber Welch, Senior Manager, Graphite Financial

 Firdman gives an example of how internal communication gaps can derail a month-end close process. “We had a situation where our credit card stopped integrating into our expense system. An employee tried to fix it on her own but didn’t really say anything about it. Because of this, the other things she was supposed to work on started getting pushed back. So, it’s always better to identify problems as soon as you can. And good communication is an important part of this.”

“Communication is very important because you depend on it to close months-end,” agrees Gregory. “I get my team to communicate with all my stakeholders upfront. I try to set up a very good rapport with the people that are going to provide us with the information, and this helped them appreciate my deadlines.”

Building strong relationships throughout the company can help finance teams shake their reputation as bean counters. “Unfortunately, sometimes people think we’re just hounding them for information. So, I learned to build relationships with my department heads and employees. This really helped them understand how delays in getting data can impact our month-end close. I’ve gotten a lot of success from having conversations that aren’t around accounting,” says Firdman.

“But not everyone is going to come to you before the deadline. And no matter how well the machine is oiled, you’re still going to find communication gaps,” says Welch. “I’m a big fan of building a neutral level of communication within my team. Because I would rather have somebody come to me and say, I’m really stuck on this. Or say that we’re not making progress because of X. Then we can find a solution together that prevents those bottlenecks.”

Welch also points out the importance of understanding communication preferences. “I highly recommend that everyone knows everyone else’s style of communication. I might be the person who writes. But I also have co-workers that prefer to pick up the phone and talk for five minutes, and it’s a quicker process! You can make far more progress when you understand those communication nuances.”

3. Avoid employee burnout: Have a backup

“Month-end close is a continual process,” says Gregory. “When you close a month’s books, you need to start the next month’s books immediately. You need to hit the ground running for the next month to have enough time to overcome bottlenecks.”

This level of intensity without adequate staff, support, or resources can create employee burnout. And this may cause employees to quit, which in turn can further stall month-end close processes. “It can seem to be continuous. And this can cause a lot of burnout in accounting. So, we need to ensure that people in a small accounting team feel good about month-end closes,” adds Firdman.

“We need to ensure that people in a small accounting team feel good about month-end closes.”

Tanya Firdman, Senior Manager, Teampay

The best solution is to build backups into your month-end close process. “Have a primary and a secondary on every task. You don’t need a complete statement of work, but you need a basic level of knowledge about where a piece of data comes from and what it means,” says Gregory. “That way, if somebody is going to be out on paternity leave, we can still get things done.”

Welch highlights the need to expect the unexpected, saying, “There’s always a hiccup. Very rarely will a month-end close go perfectly. The key is to understand how to approach a problem when it arises, whether that’s understanding a simple accrual entry error or figuring out who to ask for a solution. I am a big fan of having contingency plans in place. So, when something goes wrong, I know who I can ask and where to find data. So, plan, plan, and plan.”

“There’s always a hiccup. Very rarely will a month-end close go perfectly. The key is to understand how to approach a problem when it arises, whether that’s understanding a simple accrual entry error or figuring out who to ask for a solution. I am a big fan of having contingency plans in place. … So, plan, plan, and plan.”

Amber Welch, Senior Manager, Graphite Financial

Technology can help small and early-stage companies automate month-end close processes

Small and early-stage companies don’t have to settle for sloppy month-end closes or burnt-out finance teams. Instead, they can automate month-end close processes and establish proactive bookkeeping practices.

Request a free demo to understand how Teampay can help your company automate month-end closes by setting up proactive invoicing and spend management systems.

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    Cross Company Communications & Collaboration Tools

    A financial controller’s role and responsibilities are largely determined by the size of the company. And while it’s common practice for controllers to be responsible for managing data, they are sometimes also responsible for running an effective and efficient department and establishing the organization’s finance culture.

    An organization’s finance culture is established from the top down, and one of the most important components is communication and collaboration. Email, shared folders and services like Slack have made it easy to embrace collaboration. Now, email plugins and Slack apps let organizations build on these tools to further enhance their ability to communicate.

    Within the Slack ecosystem, there are plenty of finance-related apps that can streamline processes, approve expenses and much more. Teampay is one such Slack app that can be rolled out company-wide to manage purchasing approvals.

    Wrapping Things Up

    While many of these tools have been around for a number of years, the rise of new apps and automation services is changing the way financial controllers do their jobs. Identifying the right finance tools and embracing automation is an important step for any controller who wants to maximize their impact on their organization.

    If you’re interested in learning more about the role of automation in accounting and how it has the potential to further shake up this industry, check out our piece: 4 Reasons Why Automating Accounting Functions Is The Future.