5 key tips for a seamless financial year-end close

Vaco - Seamless financial year-end close tips - blog graphic

The financial year-end close is always a crucial time (and a big hurdle) for most organizations’ accounting and finance departments. The ongoing COVID-19 pandemic has amplified the biggest challenges of the year-end close process, with many businesses experiencing increased financial stress, broken processes, and accounting teams that are understaffed.

Stephen Dyer, Managing Partner of Vaco in San Antonio (formerly Aventine Hill Partners), is an industry veteran who works everyday with companies who are facing setbacks and challenges in their key business processes. The financial year-end close is a common challenge for many of Dyer’s clients. Understaffed accounting departments, challenges with data structure, and process setbacks are some of the biggest hurdles Dyer sees as year-end close draws nearer. 

Erica Baker, a Vaco Managing Director and Partner who works alongside Dyer in San Antonio, is a Certified Public Accountant with over 20 years of professional experience. Erica is focused on understanding the business operations, drivers and goals within CFO organizations in order to help them achieve their critical goals. She understands firsthand how vital it is for companies to have the right accounting and finance support, especially during the deadline-driven environment of year-end close.

As millions of companies approach the fiscal year-end close on December 31, Dyer and Baker provide some key pieces of advice for making the process as efficient and easy as possible.

Create a specific, repeatable close process

One of the biggest challenges during year-end close is inconsistent company-wide processes and deadlines. When multiple business units—often spanning various geographic locations and currencies—take an ad hoc approach to the close cycle, accounting teams get inconsistent information on inconsistent deadlines. Tasks may be tracked in a spreadsheet that isn’t updated, benchmarks are nonexistent, and time is wasted hunting down information that’s lost in the ether. 

Broken processes lengthen the close cycle, and can delay vital financial reporting. The first and most important way to improve these struggles is to create a repeatable, company-wide close process.

  • Evaluate each step in the close process for its priority level, average time to completion, and organizational dependencies
  • Create a pre-close checklist that details each task that must be completed before the close process begins
  • Create a close schedule that outlines each task and its corresponding deadline, with dependent tasks remaining open until preceding steps are complete; assign tasks to team members according to their specific competencies
  • Schedule follow ups and reminders so team members can stay on track to meet deadlines or request additional support 

Once you have a consistent protocol in place, make sure each department within your company is aware of the process and is trained in following it. 

Evaluate your monthly and quarterly close process

Companies who haven’t streamlined their monthly and quarterly close processes are more likely to find discrepancies and issues when year-end close rolls around. Evaluating and improving these processes can save time and eliminate potential reporting errors at the end of the fiscal year. 

A key first step in improving monthly and quarterly close is to perform risk-ranking for General Ledger accounts.  

Ranking each account for its level of risk, using qualitative and quantitative factors, can help companies determine how often a particular account should be reconciled. High risk accounts require daily or monthly reconciliation, while medium and low risk accounts may require only quarterly or year-end reconciliation. 

Keeping high-risk accounts reconciled on a consistent basis will prevent large errors from being uncovered during year-end close. It also provides public companies with enough time to correct errors before SEC reports are due and eliminates other risk and reporting errors that can be costly.

Overall, Baker says, companies should hone in on process improvement opportunities, without hyper focusing on systems and technology. 

“Process improvement isn’t always systems-related. It can start with performing walk-throughs, documenting your processes and really understanding them, so you can identify gaps and areas for improvement that will help you, not just now, but in the years going forward,” she says. 

Eliminate manual processes

According to Dyer, year-end close is a critical time for companies to dig into their tedious manual processes and really determine where improvement opportunities lie. Some manual processes can be quickly and easily automated, trimming time off the close cycle and reducing the amount of stress on the accounting team. 

Manual processes are not only extremely time-consuming, they also increase the likelihood of human error, potentially compromising the integrity of financial data. When data is entered manually and stored in spreadsheets, for instance, tracking changes to the data is nearly impossible, and collaboration across departments can create serious headaches.

Fortunately, there is a range of automation solutions available, most of which can be integrated with a company’s ERP system. 

Accounts payable automation, for instance, can verify data, match invoices, streamline approvals and produce reports on a schedule. 

More robust solutions, like financial close software, can help companies centralize their close process, with automated workflows, real-time dashboards, data aggregation, close task management and assignments, and spreadsheet integrations. 

Of course, this is easier said than done. Every company has unique needs and pain points, and most business leaders don’t have the time or resources to conduct an audit of their manual processes. That’s when external resources, like experienced consultants, can be essential. 

“We encourage our clients to use the year-end close process as an opportunity to find where the optimization and automation opportunities lie within their accounting and finance teams,” says Dyer. When Vaco is scoping a project to help a client during year-end close, Dyer says, the teams emphasize the ongoing discovery of long-term strategies and solutions.

“It’s not just how can we solve this problem right now? It has to be a long-term strategy, whether it’s investment in automation or new systems, integrations with an ERP, or finding the right people for a long-term team,” Dyer says. 

Address the threat of burnout on your accounting team

As the economy rebounded from the first wave of COVID-19, thousands of companies entered the hiring arena, hoping to replace lost accounting talent and build out their teams for critical finance initiatives. These companies were faced with the most competitive hiring market in two decades, as well as record levels of voluntary employee turnover. 

As a result, many accounting teams are approaching end-of-year financial close feeling overworked and understaffed. These employees are facing tons of overtime and late nights and are navigating a stressful, complex regulatory environment. Burnout is likely not far behind. 

Burnout is such a specter over the workplace—and such a serious, costly problem—that it is now recognized by the World Health Organization’s International Classification of Diseases (ICD-11). While the condition isn’t categorized as a disease in the ICD-11, it is recognized as a workplace phenomenon, and the WHO is developing evidence-based guidelines to address it. 

The symptoms of burnout—exhaustion, disinterest in one’s job, lack of productivity, professional mistakes—are obviously a threat to an efficient and seamless year-end financial close. More importantly, though, burnout threatens a company’s retention strategies. Accounting professionals that feel stressed, unsupported, and burnt out in their jobs are far more likely to quit. 

The first step to addressing burnout on your accounting team is to assess your team’s morale and measure their confidence in the year-end close process. Create an anonymous survey with questions formulated by accounting and finance managers. Find out how long your average monthly, quarterly, and year-end close process is taking, and ask team members to expand on which tasks are most time-consuming and stressful for them. 

This information is vital in helping you determine which resources you need to streamline the process, reduce your team’s stress level, improve employee retention, and–ultimately–improve the accuracy and timeliness of your year-end financial reports.

Bring in experienced accounting resources that can immediately contribute

The year-end close process requires timelines and meticulous attention to detail, but many companies don’t have enough bandwidth to maintain both. 

They also don’t have time to cross-train employees on accounting systems and processes, and they can’t risk the quality of their financial reports by delegating tasks to inexperienced temporary staff.

Baker emphasizes the importance of bringing in accounting support that can make an immediate impact. 

“This is a time when companies are already resource constrained and have immense workloads, so they don’t have the capacity to spend a lot of time getting new resources up-to-speed. Having a team of consultants that are extremely tenured and experienced, who are able to jump in and quickly add value with limited direction, is a huge differentiator for us,” Baker said. 

Year-end accounting support with Vaco

Year-end financial close can feel like a dark spot on the calendar for many accounting departments. This is especially true when a company’s processes and systems aren’t optimized, and its teams don’t have the support they need. 

As industry veterans, Baker and Dyer are able to put their experience to work building effective solutions for their clients. 

“We have a team of highly seasoned consultants, many with 15+ years’ experience spanning both Big 4 and corporate accounting roles. This wealth of knowledge enables us to provide efficient and effective execution of not only the critical, time-sensitive tasks surrounding year-end close, but also recommendations and strategies to streamline processes and enact best practices. 

Our team is focused on helping our clients through critical peak times while also thinking about the bigger picture and supporting their future success,” Baker says.

As a global talent solutions and business consulting firm, Vaco has the resources and the network to help companies navigate all of these challenges. With accounting and finance consulting, direct hire, managed services, strategic staffing, and interim executive services, our experts can provide support across multiple business needs.

From specialized projects to long-term strategy, we’re with you all the way. 

Need support during year-end close?

Contact Vaco today. 

Vaco in San Antonio is the former Aventine Hill Partners (AHP), one of San Antonio’s premier advisory, consulting, and executive search firms. Vaco acquired AHP in 2019 and today provides talent solutions and business consulting to over 12,000 clients in Texas and around the globe.

 

 

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