Closing the books: How your start-up can avoid period-end chaos
Find out how you can streamline closing out your income and expense accounts and recording your profit and loss at the end of a financial period
Closing the books and preparing company accounts at the end of a financial period is an unavoidable distraction from the main objectives of the business for most start-ups.
However, replacing the typical ‘hairball’ of systems with a single, cloud-based finance system can support ‘continuous accounting’ best practice that speeds up the process, automates many tasks and provides greater visibility for your management and investors.
Closing the books
Closing the books refers to the accounting process of closing out your income and expense accounts and recording your business' net profit or loss onto a balance sheet.
For your start-up, tasks such as closing the books at the end of a financial period can be a time-consuming and cumbersome process.
The period close process is a necessary but stressful distraction from the main focus of growing your business, often encompassing late nights and endless mundane reconciliations and checking of information for your finance team.
As a start-up or high-growth organisation, the period close can be even more challenging because of a lack of formal processes, fast-changing structures and growing headcount.
And the pressure from investors to get an accurate view of financial performance can be intense. That means speed is a priority.
Management wants more timely access to the very latest data available so that it can make quicker and better-informed decisions.
And a faster close to accounting periods frees up your staff to spend more time on higher value work, such as analysing results, spotting trends and advising the business on how best to achieve its high-growth ambitions.
And lest we forget, closing the books is also about compliance.
In addition to speed and the need to hit tight filing deadlines, accuracy is also essential to meet the high standards of external reporting that investors and regulatory authorities demand.
Ways your start-up can avoid period-end chaos
Many organisations now take the approach of ‘continuous accounting’, where tasks such as reconciliations are embedded in day-to-day activities throughout the month or quarter.
That means there isn’t a sudden spike in jobs as the financial period end approaches.
Done properly, continuous accounting can also enable real-time reporting and support better and faster decision making by your business.
The challenge for your start-up in achieving all this, however, is that you're often hindered by a ‘hairball’ of different systems, which have built up over time to solve specific problems.
These systems are often poorly integrated and this then results in a plethora of spreadsheets and manual processes being created to ‘fill in the gaps’ in processes.
Using a single ERP system
The answer to avoid headaches around closing the books lies in a modern cloud-based finance system.
It’s no coincidence that companies which regularly, and consistently, achieve faster financial period closes tend to be the ones using a single, fully integrated ERP system.
All teams, functions and geographies within your business are able to access the same general ledger, a common chart of accounts and a ‘single version of the truth’ when it comes to data on inventory, payroll, sales orders, customers and so on.
A real-time cloud-based ERP system also enables your start-up to automate many routine and time-consuming tasks such as journal entries, account reconciliations, variance analysis and inter-company transactions.
Instead these can be executed automatically throughout the month, in the cloud.
If your company’s core accounting system is based in the cloud, your finance team members can perform period-end tasks regularly, regardless of the time, time zone or their physical location, simply by jumping on a device with a web browser.
And your managers can also easily access dashboard-based views of how work is progressing and what might be left to do as period-end approaches.
With the foundation of a modern cloud-based finance system, your start-up can adopt a continuous accounting approach to period closes.
You can provide the greater efficiency, higher accuracy and clearer financial statements that are imperative for high-growth organisations.
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