Reasons Why Your Month-End Close Still Takes 3 Days & How to Finance Reduce It to Hours)
Month-end closing remains a challenging experience for many financial teams. It’s hard work involving several days of chasing receipts, waiting for approvals, verifying expenses, fixing mistakes, and doing other stuff before finalizing the reports.
But is it really impossible to accelerate the closing process? Not anymore! Leading companies who adopted automated expense management software report that their month-end close now takes from 6 to 83% less time (as compared to the past). For some teams, month-end reconciliation took 3 days; now, it only takes a couple of hours!
Why do you still need 3 days or even longer to finish this routine task? Here are the main reasons why.
Why Does the Month-End Closing Process Take So Much Time?
Most finance heads tend to think that reconciliation is the main challenge that slows down the whole process. However, this challenge appears later in the expense management cycle.
If there is no centralized expense management system finance teams are forced to spend a lot of time on collecting expense data from various sources (spreadsheets, emails, paper receipts, messengers, etc.)
It becomes especially relevant for pharmaceutical organizations since their employees called Medical Representatives (MRs) constantly face spending travel expenses, fuel, accommodations, and other costs during client visits.
Due to the lack of a single expense management software system, all spending goes unnoticed until employees start submitting expense claims.
Root Cause #1: Disjoint Expense Information
The main reason why the month-end process takes more time than it was planned at the very beginning is the lack of a centralized expense tracking system.
Employees usually send expense claims through different channels, which causes discrepancies and additional delays. Finance teams need to gather data from various sources, causing additional risk of errors and duplicates.
With an automatic expense tracking software solution, all the expense data becomes centralised. All the expenses can be uploaded through one unified platform, and finance teams get full visibility of all the spending during the whole month.
If all expenses are already centralised, reconciliation will take less time.
Root Cause #2: Manual Approval Process Bottleneck
Approval of claims is yet another major factor slowing down the process.
In most firms, all the expense reimbursement requests are manually approved by the managers before sending them to the finance department. In this case, whenever the manager is out traveling or attending meetings, the approval of the request is bound to be delayed for several days.
At the end of the month, the finance department waits for the pending approvals to do their reconciliations.
The Modern expense report software solves this issue with automated approval workflow. The claims get sent to appropriate approvers automatically depending on certain rules, eliminating delays and making sure that the expenses are approved during the whole month and not in its end.
Root Cause #3: Late Compliance Checks
Yet another reason why reconciliation takes so much time is the fact that compliance checks are unusually done during reconciliation.
Finance teams face such problems on a regular basis as:
- Lack of receipts
- Duplicate claims
- Mistakes in expense categories
- Violations of policies
- Incomplete Information
Fixing the issues mentioned above is a time-consuming process that leads to delays in reporting.
The Modern business expense software automatically enforces the company policies during the process of expense submission. The non-compliant claims are highlighted immediately.
Cost of Delayed Month-End Close
The effects of month-end close being late are not limited to the finance team.
- Delayed Business Decisions
The leadership depends on accurate financial reports for making strategic decisions. Delays in reporting lead to missed opportunities and poor responses to changing market situations.
- No Spend Visibility
Without access to real-time data on expenses the organization lacks information about overspending.
- Increased Workload for Finance Teams
Manual reconciliation leads to additional workload in the form of overtime for finance professionals.
- Higher Likelihood of Mistake
The greater the number of manual procedures performed by finance teams, the higher the probability of mistakes that could affect the accuracy and completeness of the report.
How Faster-Closing Organizations Get to Hourly Month-End Close
The secret to achieving the faster month-end close is the same for all of the fastest organizations – they automate expense management ahead of the month-end.
- Centralize Expense Management
As a first step, you need to get a full-fledged expense management software solution that will collect all of the expenses into one place.
Your employees will submit expenses via the expense management application, while you will have full visibility into spending within departments and branches.
- Automate Approvals
Automated workflows will make sure that claim passes the approval process timely. Your managers will be notified about pending claims, while your finance teams will have the opportunity to track the progress in real time.
- Automatically Policy Enforcement
The best expense management software will enforce policies automatically, which will help decrease compliance problems and minimize the need for manual reviews.
- Monitor Spending Real-Time
With the use of efficient spend management software, finance leaders will be able to see spending trends during the month, rather than having to wait until end-of-the-month reports get generated.
Proactive insight will spend and simplify the reconciliation process.
- Simplify Reconciliation Process
Automatic categorization, receipt capturing and expense matching will decrease the need for manual reconciliation process. At the end of the month, the majority of transactions will be already reviewed and approved.
Why Pharmaceutical Companies Need It the Most
Many pharmaceutical companies employ big teams that travel a lot to various regions. Lots of expense reports come from traveling, fuel reimbursements, accommodation costs, meetings with clients and so on. Without an automation process, the finance department can easily get overloaded.
Modern expense management solutions will help pharmaceutical companies organize expense data, automate approvals, ensure compliance, and achieve full visibility into their field-force spending.This will not only accelerate month-end close but will also facilitate reimbursement process and increase satisfaction among employees.
How Expendesk Helps Makes Closing Faster for Finance Teams
Expendesk is a platform powered by artificial intelligence that makes expense management, reimbursement, approvals, and compliance management very simple for users.
With automation of processes, real-time insights, and intelligent workflow management, Expendesk allows businesses to:
- Automate financial operations
- Approve expenses faster
- Become compliant
- Remove Excel-based processes
- Increase spend visibility
- Close books faster
In particular, pharmaceutical companies that need to manage expenses for their huge Medical Representative teams may benefit from Expendesk.
The reason why closing a month takes three days for you is probably not the finance team but the outdated processes backing them.
Spreadsheets and manual processes hinder closing and cost the company money and time. With a modern expense management solution like Expendesk, organizations can automate the process and speed up month-end closing from days to minutes.
Finance leaders that prioritize efficiency, accuracy, and growth now have an opportunity to make closing faster.