Accelerate your month-end close process for better data and results

At a glance:

• Play offense, not defense. Current financial data empowers you to make informed future decisions and address current challenges.
• Incorporate streamlined strategies. Simple changes can increase efficiency and prepare you for growth.
• Meet your external reporting needs. Confidently and easily keep your partners, investors and customers informed.

Reach out to Aprio financial advisors for guidance and advice on implementing these strategies for success.

The full story

For many government contractors, the monthly close process can be protracted and result in reports filled with stale data. This prevents executives from making effective financial management decisions or chronically sending late reports to lenders and investors.

Given that historical cost experiences are continually used to inform future contract bids, outdated information can lead to inaccurate bids, potentially locking you into low-margin work for the years to come. Therefore, staying up to date with your financial data is critical to ensure competitive and profitable contract opportunities.

Prioritizing, optimizing, and defining tasks will help streamline the process and ensure a smoother month-end close.

Define key dates, roles and reporting needs

1. Create an accounting calendar. Develop a calendar and set firm dates and cutoff times for key activities such as timecard completion, pay changes and lender report deadlines. Be sure to set realistic timelines that consider holidays, weekends and other adjustments.
   Setting calendar reminders for key staff ensures that time-sensitive tasks are completed on schedule, and a simple checklist prevents items from being overlooked.
2. Define Roles. Ensure all team members are on board and aware of their roles. To avoid single points of failure, identify and train alternate staff, particularly for immovable tasks such as payroll.
3. Speed up cutoff times. Don’t wait until the month is over to start end-of-month tasks. Instead, accelerate the cutoff date for reports with predictable or insignificant amounts. For instance, bank reconciliations can be done through the 25th and finalized on the 1st.
4. Reevaluate and refresh your monthly reporting package. Are you preparing detailed reports that no one is using? Identify the needs of the end users and determine metrics that significantly affect your business. Focus your reporting efforts on key data first. Then, you can provide valuable insights and enhance the effectiveness of your reporting process.

Prioritize activities that add value

1. Timesheet Management. Active federal contractors must have a robust policy for timesheet entry that is clear to employees and managers. Regular compliance checks throughout the month are essential, and you should use automated email reminders to drive adherence. Accurate and timely billing not only enhances cash flow but also demonstrates competency to your customers.
2. Minimize corporate credit card usage. While getting points or rewards and an easy source of financing is nice, untangling credit card activity can be extremely time-consuming for your staff. Their labor cost and the write-off of unidentifiable items often outweigh any benefits derived.
3. Incorporate due dates in your vendor agreements. As you set up agreements with significant and recurring vendors, add due dates for receipt of vendor invoices that are material to your customer billing and month-end closing timetable. This proactive approach will help streamline the payment process and ensure smoother financial operations.
4. Consider a “soft close” for interim months. During a “soft close” period, focus on key financial reviews, such as bank reconciliations. Use recurring journal entries for routine items and focus on material items. Reserve more comprehensive processes for quarterly and year-end closes. This approach allows for efficient financial management while ensuring accuracy during crucial reporting periods.
5. Plan for your growth needs. For fast-growing federal contractors, adequate and qualified financial staff is essential. Growth comes with customers, lenders, or investors who require sophisticated reporting. Supplemental help, including full-managed services, part-time expertise and fractional CFO support may help you succeed in this complex industry.

Optimize and automate

1. Optimize system integration. If your accounting, bill pay, banking, payroll, credit cards and time systems are not working together, now is the time to address the issue. Consider adding employee training to enhance the skills of the team.
2. Upgrade your software as needed. Software companies continually roll out enhancement features. Are you using all of them? Are you aware of them? A report you may manually prepare by habit may now be available as part of your software.
3. Add your budget to the accounting system. Align your budget and chart of accounts and add the budget to your software so you can see how you are trending without creating another manual worksheet.
4. Utilize a central accounting email, such as “accounting@yourcompany.com,” accessible to multiple people and funnel all AR (Accounts Receivable) and AP (Accounts Payable) activity through to limit impediments to the flow of activity.

A final word

Streamlining the monthly close process for government contractors is imperative to maintain accurate and up-to-date financial data. By defining roles, setting clear calendars, and prioritizing tasks that add value, contractors can enhance efficiency and decision-making.

Incorporating automation, optimizing software, and aligning budgets with accounting systems further contribute to a smoother month-end close, ensuring competitiveness and profitability in contract opportunities.

Related Resources/Assets/Aprio.com articles/pages

48 CFR Part 9904 — Cost Accounting Standards

FAR Part 30 – Cost Accounting Standards Administration

Aprio accounting experts and advisors are here to help you strategize how to meet your financial reporting challenges. Connect with our team today