If every finance and accounting team has one thing in common, it’s probably that we all dread our month end close process. Of all the regular tasks finance teams perform, month end accounting is one of the most tedious, time-consuming… and essential. In fact, month end is so essential that it tends to take precedence over everything else… including analysis tasks that could actually help improve the company.
But what if your month end reporting didn’t have to take that long? What would your job look like if you could automate your busywork? These were the questions Mike Skillingstad sought to answer when he and his team developed Catalyst by EBM Software. Today, we caught up with Mike to learn how and why Catalyst solves the month end closing problem.
What Makes Month End Closing a Pain Point for Finance Teams?
According to Mike, the month end close process presents three problems to most mid-market accounting and finance teams:
- It’s slow and tedious
- It absolutely has to be accurate
- The info diminishes in value as it ages
It’s the way these three problems intersect that makes month end such a pervasive challenge. “Month end is a problem for quite a few companies because it’s a really tedious job and it has to be done right,” Mike explains.
Considering how accurate the financial information collected for it has to be, it makes sense that finance teams typically take their time completing month end reporting. Unfortunately, however, this brings us to Mike’s third problem: your monthly financial report isn’t as valuable after its close period has passed.
“The close cycle is so long,” Mike explains, “It can take 30 days to close the month and 15 to 20 days to report on it. So now, you’re two months out from the actual period of time you’re reporting on. Meanwhile, people start to form gut opinions on how to guide the business.” That’s the real problem with month end: it keeps financial data from influencing the business as much as it should.
What Makes Month End So Slow for Mid-Size Businesses?
For most teams, Mike says, it’s because the preliminary processes are so tediously manual. Before a team can get into the actual “whys,” they have to get through three stages of month-end close checklist busywork.
- Manual data structuring
- File & format reconciliation
- Plan & actuals comparison
1. Manual data structuring
“Most companies’ ERPs only produce their trial balance,” Mike explains, “They have to take that trial balance data and structure it in Excel manually. Right there, you already have room for error in the data entry.”
2. File & format reconciliation
“Once you have everything in Excel, you’ll do variance analysis,” Mike explains. “The problem is, the information you need to do that analysis – like your financial statements, cash flow, or your balance sheet – often lives in different files and/or exists in different formats. So now you’re comparing apples and oranges and trying to make all of that work together.”
3. Plan & actuals comparison
“Once that’s all married up, you start to look at the actual variances,” Mike explains, “But because the plan isn’t in the same level of granularity as the actuals, you can’t see the ‘whys’ right away. Instead, you spend all this time going back and forth between the plan and the actuals and then your report comes out two months later.”
How Can a Small Team Speed Up Their Month End Close?
The worst thing about month end is that the actual analysis isn’t why it takes so long; it’s all the busy work. “Typically, accounting spends 80% of their time dealing with busywork when closing the books for a month,” Mike explains,” then they spend the last 20% explaining those numbers, and they have no time left to look for improvements.”
The best way to speed up the month end close process, therefore, is to make that 80% busywork portion much faster. That’s exactly what EBM Software designed Catalyst to accomplish.
How Does Catalyst Speed Up Month End Reporting?
Catalyst’s reporting, planning and analysis tools were designed to speed up each step of the month-end process. “Catalyst automates all of that heavy manual busywork we talked about,” Mike explains. Here’s how Catalyst’s tools automate each step of your monthly busywork:
1. Manual data structuring
“Catalyst pulls all of the data from your accounting system and structures it for you automatically,” Mike explains, “You don’t have to worry about whether it’s been grouped or summarized the