As a business owner, you may be used to seeing articles about the importance of getting started early for your fiscal year-end. Do you know what’s even better than getting prepared? Staying prepared!
Be honest: How many times have you realized during the year-end close process that a significant transaction was recorded incorrectly? Correcting that mistake months after the fact probably took far more time than it would have taken to correct it on the fly. And even more disturbing, you have been operating under incorrect assumptions for all that time.
In a year that has thrown more than its share of curveballs, the last thing we need is a big surprise when we finally close the books for 2020.
So, by all means, get started now on your fiscal year-end checklist: reconciling bank statements, tracking down missing transactions, collecting receipts to support your business tax deductions, and all the other tasks that are required to close the books.
At the same time, consider that there might be a better way — a way that results in a painless close process while making crucial business information available in real time, empowering you to make smart business decisions today.
Strive for Continuous Close
Closing the books has always been a laborious process that ultimately gave us an outdated product. Even large companies with expensive accounting packages complain, The numbers in my financial statements are too old. They are nothing more than a historical snapshot of operations.
As the pace of business accelerates, the need for immediate decision-making has never been more important. Numbers that are finalized weeks after the fact are of little use to a business owner looking for answers about how to move forward through uncertain times.
The good news is that you no longer have to wait weeks (or months) for a clear picture of your bottom line. Even better, the close process doesn’t need to be so laborious. Automation makes it possible to move to a continuous close process, which means that by the time the end of the month or the year rolls around, 95% of the required tasks are already done. The tools to make this happen are within your reach. All you have to do is to be receptive to new ways of capturing, organizing, and reporting financial data.
Get into a weekly rhythm. Last week, you may have invoiced customers, collected money, made bank deposits, received and paid bills. But did you also record those payables and receivables and reconcile the amounts with your automated bank feed? Did you capture your receipts electronically and record those expenses in your general ledger software? Transactions can and should be recorded on a weekly basis to match the pace of business today. If you don’t get into the habit of recording transactions on a weekly basis, then you are always going to be playing catch-up, reporting historical data long after you have already made decisions based on incomplete and possibly misleading information. Businesses that settle into this weekly rhythm, on the other hand, find that they are never more than a few clicks of the mouse away from accurate, up-to-date reports on the results of business operations.
Report business activity promptly to make timely decisions. A weekly rhythm of recording transactions enables you to generate up-to-date financial reporting at any point in time, not just at the end of the month, quarter, or year. Having access to this information when you need it means you will always know the true state of your business operations, and that accurate and timely data is more important than ever. This is especially important in year-end tax planning for this unprecedented year. Even in the best of times, planning for the tax impacts of your business decisions entails balancing a number of competing priorities. Rather than relying on your “gut,” wouldn’t you rather have confidence that the numbers you’re relying on are indeed reliable and up-to-date?
Embrace new tools. Automation is the key tool that allows businesses to move toward continuous close and real-time reporting, and it is within reach of even small businesses with limited budgets. Many accounting packages sync with financial institutions’ feeds, enabling automated bank reconciliation. Thanks to advanced technology that automatically extracts key data from a range of documents, capturing and recording your expenses can be as simple as snapping a picture of a receipt. These tools are accessible and affordable for any business — and they are becoming more and more integrated with one another.
Move Forward Confidently
The upshot is that your business does not need to be handcuffed by the time-intensive, laborious month-end and year-end close processes. And while we likely will continue to need to perform a “hard close” after each month and year-end, the process itself doesn’t need to be hard. Most important, you have the ability to run reliably accurate reports at any point in time that reflect the true state of your business — and that means you can make strategic business decisions with confidence.