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Embrace the ebbs and flows of the month-end cycle

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The relentless procession of month-ends may make you feel like you are on a production line, a slave to the financial rhythm. But with this orderly pattern of work comes many benefits.

15th Jun 2022
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There is a curious phenomenon among management accountants. It may not be exclusive to them but is very noticeable in the finance department: the year seems to pass at astonishing speed. The rest of the world seems to watch the days go by, relishing each moment and the passing seasons. But in the parallel warp-speed universe of finance the year is merely broken up into blocks of 12 months. You’re either hurtling into a month-end or on the way out, ticking endless lists of tasks for completion of the ledgers. It’s a bit like that scene in Ben-Hur (the Charlton Heston one, not the horrendously bad recent remake) where the hortator (there’s a new word for you) beats the drum on the Roman ship to set the speed of the rowers. It builds up to a crazy ramming speed before it winds down on completion. The ebbs and flows.

But the regularity is good. People are comfortable with repetition as it marks out your working pattern. There is satisfaction when tasks are finished and reconciliations are complete for month-end. My body’s biological clock is tuned to those days. Holidays have to be planned for weeks in advance. Every unplanned absence has a noticeable ripple effect in the department.

Rhythm of life

Month-ends are vital. They draw a line for checks and balances, and act as a pause button in the world of commerce in order to take stock of where we’re at and where we’re heading. It is a health check for the company, so to speak. The financial month-end process is when the finance department collects, reviews and reconciles transactions and financial activity from the previous period to ensure accuracy and compliance, while maintaining data integrity for planning, performance and forecasting.

In my wet-behind-the-ears days I remember working at an engineering company in Manchester. It was my first proper job where I learned about cost accounting. The people were brilliant, but the company itself was flawed in much of its working, the most noticeable being that it did not have a month-end process. The weeks and months just flowed into one another and besides the weekly payroll, accounts payable and receivable, there was little evidence of any other financial closure. It performed no meaningful analysis. The head of finance had worked his way through the ranks with little appreciation of forecasting techniques and budgets. As long as the orders came in and we were getting them through the door on time things were tickety-boo. 

With hindsight it came as no surprise that the company went bust. The product we made was too expensive and there was little emphasis on monthly performance. Thankfully I had moved on by the time the company closed down but many good people lost their jobs.

The lack of monthly or periodic financial analysis bred a culture of denial and ignorance.

Practices make perfect 

So, it comes back to the usual cliches of the finance department. Responsibility and ownership of your performance is vital to a healthy and progressive organisation. As management accountants we are the key to this process and the communication that must be permeated consistently through the organisation.

The best practices for month-end would include the following and not in any particular order:

  • Accuracy: Being particular about the data information you are handling, the relevance and materiality.
  • Time management: Knowing and meeting your deadline, working efficiently. Setting daily checklists and goals for the effective and accurate closure of month-end.
  • Know your contacts: Management accountants need to know who their contacts are, where information is coming from and the people who are relevant for the information.
  • Relationships with key staff: By building relationships with people across the organisation you can understand the source of information and the value and accuracy of it.

By nurturing this culture of working as a team the month-end process will be organised, effective and efficient. The drawbacks are there for the month-end process. It is repetitive and cyclical. No sooner have you finished one month-end than another one rears its head. But there is comfort in that. Familiarity brings with it some contentment.

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paddle steamer
By DJKL
15th Jun 2022 14:48

Catch with month end reporting is its repetition can mean those that are supposed to take heed just nod everything through with little thought.

We no longer bother, but then we are pretty unique, few debtors, few creditors relative to our turnover (rents we receive) and pretty certain income and costs, so I can monitor pretty well by keeping a note of the total bank balances on a daily basis (the three days I am here), effectively our balances tend to range across a £200k band throughout the year ( due to tax payments in January, July, October and December) so I only get agitated if we look like dropping below my lower estimate. (which we don't these days)

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