Consider the following scenario: You run an enterprise that relies heavily on a particular supplier that suddenly raises its prices. However, it isn’t just that the prices are higher — you are completely oblivious of this hike until it is too late. You’ve been paying a higher price for months and could have found a new supplier. This is a detriment to your bottom line.
But that’s where month-end reporting can help. Month-end reporting produces balanced balance sheets, which are the best way to “comprehend the financial positioning of a business or corporation.” With consistent month-end reporting, your business will accurately reconcile its earnings compared to its outgoing expenses every month. And along with accurate account reconciliation of your company’s earnings and spending, month-end reporting ensures an organization’s compliance with both internal and external regulatory and financial criteria. For example, month end reporting provides the necessary oversight of internal finances to quickly identify anomalies, such as fraud (or that favorite supplier suddenly raising its prices).
And while the process of end-of-month reporting comes with challenges, as a standard and recurring event, it should be executed with the same precision and acuity as your year-end close.
What Is Month-End Reporting?
Month-end reporting is the process companies and organizations use to ensure all monthly transactions are appropriately recorded without accounting errors. In smaller enterprises, this means having a balanced general ledger, and in large enterprises, this concerns a significant amount of risk management.
Some of the things that a company’s month-end reporting covers are:
- Reconciling all accounts
- Taking proper inventory
- Reviewing petty cash funds
- Accurate reporting of incoming cash
- Reconciliation of payments to fixed assets
- Updating of accounts payable
- And, of course, a review of revenue and expenses in preparation for the next month
And while reporting is not an easy task, it comes with benefits.
Two Benefits of Month-End Reporting
Quarterly and annual reporting is less time-consuming, more convenient, and less costly. However, you miss two critical benefits when delaying reporting.
The key responsibility of a business’s Financial Planning & Analysis (FP&A) function is to produce management reports, which help leaders stay apprised of all the information they need to make business decisions. While management reports draw on various data points and key performance indicators (KPIs), the most consistently delivered management report is the month end report because of the very real benefits that come along with it.
“Blip” Identification
Think back to the opening scenario when you were the CEO of a large enterprise suddenly paying more for needed supplies. The problem was it was only realized after the damage was done to your bottom line. No matter your business or taxpayer status (cash basis or accrual), it is essential to identify “blips.”
Imagine now that because of your month end reporting, you notice that one month’s profits were down, but that same month’s sales were steady (when comparing one month to another). Immediately, you are able to identify a supplier that had recently and suddenly raised their prices. This would have allowed you to act instantly to rectify the situation before it could affect you in the long term.
Bottom line: Because the data for month-end reporting is “being compared to factual evidence and supporting schedules, it helps to highlight major discrepancies between the general ledger and reality,” and all before you would even find yourself in an audit.
Seasonality and Forecasting
Seasonality is something that no business has control over. Deviations in customer behavior drive seasonality, and the only way to anticipate and plan for it is by month end reporting. What companies can do is analyze and understand the trends they find in their month-end reporting and use that data to forecast and plan.
Some businesses, like retail businesses, do their best in December and January, while others see their profits exploding in the summer months (like, say, a large ice cream distributor). Understanding whether or not seasonality impacts your business will benefit your business’s forecasting and stability.
Two Challenges of Month-End Reporting
While month end reporting provides a number of key insights for business leaders, preparing these reports takes time and involves challenges that must be (and easily can be) overcome.
Inaccurate data.
Things like deadlines are essential, but receiving correct data is paramount over anything else in this instance. FP&A best practice says that you have 10 days after month’s end to finish reporting. If needed, use that time to ensure the data you collect for your month end report is accurate.
No defined processes.
While you cannot start the report before the month is over, you can take specific measures to increase efficiency. Additionally, make it routine to clear the calendar for a few days and dedicate the time required to conduct these reports properly.
Complete Your Month-End Reporting in 4 Steps
No matter the size of the enterprise, creating a month-end reporting process will set a standard for your FP&A team and all the departments responsible for reporting each month.
Step 1: Align Daily/Weekly Reports With Month-End Reports
If a company’s departments create daily or weekly reports to track their activities and goals, make sure that these reports are in a format similar to the month-end reports. In addition, make sure that financial statements and financial reporting are checked for errors regularly throughout the month to save time when the month end reports are prepared.
Step 2: Prepare All Month
Clearing the calendar for a few days to properly dedicate the time needed to conduct these reports is crucial. A few days before the end of the month, make a checklist of everything that needs to be ready for the report. This includes which departments need to send you reports, which activities need to be temporarily paused at what time, which employees need to be informed (for example, payroll), etc.
In addition, top CFOs recommend giving each report category or department a risk level for errors. This lets you know which reports will likely have the most errors vs. which will have the least.
Step 3: Allocate Time for and Anticipate Errors
A large part of putting together month-end reports involves going over all of the materials for that accounting period and ensuring no bookkeeping errors are present. This is the most time-consuming step of the entire reporting process, as it can involve multiple departments and employees, and errors can often be very easy to miss. Everything needs to be done manually if you are not using accounting software solutions like Datarails, which offer automatic, real-time consolidation, eliminating errors.
Step 4: Calculate and Analyze
Once the data is deemed accurate and reliable, a company’s financial team or executive team can use formulas and charts to calculate balances, expenses, interests, revenues, salaries, etc., and analyze the information accordingly.
Level Up Your Month-End Reporting With Datarails
Datarails allows you to augment the tools that your teams are already using (i.e., Excel spreadsheets) and includes built-in features for groupware collaboration. This will enable companies to enjoy the benefits and flexibility that Excel offers while increasing problem solving and error detection in the everyday workflow. Datarails also ensures that everyone involved is working on a “Single Version of Truth,” the latest and most updated version, at all times. Drive productivity and collaboration in your organization while maximizing data integrity every step of the way.
If you and your team are ready to take the next steps to level up your month-end reporting goals, request a free demo or keep up with us for the latest FP&A Excel-based solutions.
