Shagun, an ex-Fortune 100 auditor and CEO of SkyStem, has created a month-end close solution called ART to help accountants handle complex operations efficiently, especially in midsized companies with limited accounting teams. Acing the month-end close process is crucial for accurate financial statements, regulatory compliance, and building trust with investors. However, failing to execute this process correctly can lead to errors in financial statements, noncompliance, fines, legal battles, and damaged reputations.
One of the significant risks of inadequate balance sheet reconciliations during the monthly activities is the increased likelihood of errors in financial statements, leading to decreased confidence from investors and stakeholders. The lack of focus on quality during the month-end close can also result in noncompliance with regulatory requirements, fines, legal battles, and a damaged reputation that takes years to rebuild. Standardizing and rigorously reconciling data across various accounts can help identify discrepancies before they become significant issues, safeguarding businesses against errors and adverse outcomes.
Inefficiencies due to a lack of standardized processes and low-quality balance sheet reconciliations can impact various aspects of a company, including hindering strategic planning, delaying financial reporting, and reducing productivity and commitment among employees. Automation can help reduce time spent on repetitive tasks like data entry, invoice processing, and reconciliation, allowing accountants to focus on more strategic tasks and improving overall efficiency and productivity within the organization.
The absence of standard processes increases the risk of fraudulent activities within an organization, such as embezzlement or financial statement manipulation. Automated financial systems utilizing artificial intelligence and machine learning algorithms can help detect fraud more easily by establishing a baseline for typical economic activities and identifying potential anomalies. Establishing standard procedures and practices, embracing automation and technology, and fostering a culture of accountability are crucial steps in achieving accurate financial reporting, boosting efficiency, and reducing the risk of fraud during the month-end close process.
Overall, companies must prioritize implementing robust reconciliation procedures, embracing automation and technology, and fostering a culture of accountability during the month-end close process. This ensures accurate financial reporting, efficiency, and reduced risks of errors and fraudulent activities. The information provided is not investment, tax, or financial advice, and individuals should consult with licensed professionals for advice specific to their situations. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning, and wealth management firms.
