Speeding Up the Year-End Financial Closure: Monthly Metric Focus
Annual Closing Efficiency Boosted through Pre-Closing Activities
The year-end closing process, a typically labor-intensive and intricate ordeal for accounting teams, can be streamlined and simplified through the implementation of pre-closing activities throughout the year. This proactive approach significantly improves the efficiency of the year-end closing, allowing teams to return to regular operations much sooner.
APQC's research reveals that the quickest organizations perform the annual close in ten days or less, nearly twice as fast as the median and over three times faster than the 75th percentile. The speed of the annual close may vary depending on a company's stakeholders and compliance deadlines. Factors such as subsequent reviews of transactions after the cutoff period should be considered when determining the ideal cycle time.
Pre-closing activities serve a vital role in achieving a swift and uncomplicated year-end close. Here are five pre-closing activities that contribute to a smoother year-end closing process:
- Craft a Blueprint: Develop a detailed plan for the annual close, including the timeline and delegation of tasks. This is particularly important in large organizations with multiple business units or global distributions.
- Engage the Business: Collaborate with all departments within the organization to ensure an understanding of how their work impacts the yearly close.
- Employ a Checklist: Utilize a checklist that outlines all pre-closing, closing, and post-closing activities. This enables the accounting team to complete tasks efficiently and without delay.
- Monthly Reconciliations: Regularly reconcile complex accounts to save time and ensure accuracy during the year-end close.
- Monitor for Changes: Keep up-to-date with any possible changes in accounting or tax regulations and address them ahead of the year-end to avoid unexpected complications.
With an organized checklist and schedule in hand, the accounting team can identify and perform as many pre-close activities as possible, thereby speeding up the year-end closure, reducing stressful work spikes, and returning valuable time to focus on strategic business decisions.
Perry D. Wiggins, CPA, serves as the secretary and treasurer for APQC, a nonprofit organization based in Houston, Texas that specializes in benchmarking and best practices research.
The Enrichment Data provided suggests that pre-closing activities contribute to accurate data, reduced errors in the year-end close process, consistent monthly close processes, and improved efficiency. Proper classification of capital expenditures and preopening expenses, along with alignment of reports, communication, and planning, further enhance the overall efficiency of the year-end closing process.
- Proper classification of capital expenditures and preopening expenses as pre-closing activities can contribute to accurate data and reduced errors in the year-end close process.
- Aligning reports, communication, and planning within the organization during pre-closing activities can further enhance the overall efficiency of the year-end closing process, leading to a smoother and quicker year-end close.
