Answer to an Innocent Question: Why is there more work for the back office at month-end?

Answering a reader's question: Why is there more work for the back office at month end?So here is a question I got from a reader:  Why is there more work for the back office at month end?

For finance and accounting professionals, “month-end” generally refers to right before the end of the month and up to a week after the month ends.  More works happens during this time because:

1. There is more sales activity.  The revenue group will typically make an end-of-month push to hit sales goals, which means more processing volume for the accounting and administration groups that record those sales.
2. More payment and collections activities occur at month-end.  Everyone is focused on performance at month-end, which means your collections group is doubling up on collection efforts around that time, and that translates to more processing work.  On the flip side, your accounts payable group is also fielding vendor requests to remit payment, resulting in more check runs.
3. Month-end is when the company must account for its performance by publishing financial statements.  So the accountants are:
   • Finalizing the month’s transactions.
   • Fixing errors in the ledger.  Errors that are not addressed timely show up during month-end close.
   • Producing financial statements and reviewing them for accuracy.  Potentially, the financials are also distributed for multiple levels of senior management review and field review.
4. The bulk of the financial analysis also gets done at this time, following the production of the financial statements.  Analysts are looking at the month’s performance and comparing to prior month, prior year, budget and forecast to explain variance.
5. Month-end (and quarter-end) is when most of the company’s key internal controls in the finance and accounting occur – Reconciling balance sheet accounts, reviewing system access, completing checklists, etc. – just to name a few.
6. On top of all that, there is still the day-to-day work that must be done, like pay employees, attend meetings and conference calls, etc.

In short, during the month-end process, a lot of work must happen in a short amount of time.   I don’t know the situation of the person who posed this question, so I’ll take a few guesses:

• For auditors, consultants and vendors, the month-end close window is not the best time to expect superior cooperation from Finance and Accounting.
• If you’re planning a back office initiative, consider designing it around the month-end and quarter-end close.  People will thank you because it shows that you are thinking from their point of view.  Or, break up a big initiative into smaller bits.  Here is an example of how an account reconciliation effort can be positioned and introduced as a small idea.
• For back office professionals, the key to improving the month-end close experience is to move the above-mentioned activities out of the close window as much as possible.  Then, organize, streamline or automate the rest.  Here is one tip to start.