At Krow, we speak to professional services organizations of all sizes day in and day out. By doing so, we’re no strangers to hearing about the many day-to-day challenges that services businesses are facing and striving to overcome.
One such frequently-raised issue has to do with month-end close. Or more specifically, the fact that month-end close isn’t always happening by month-end. In fact, it’s not uncommon for some companies to finish closing their month 2-4 weeks after the month has finished.
What is the problem with a late month-end close?
Just because it’s common for companies to have a late month-end close, doesn’t mean there aren’t challenges that this presents for the success of the business.
By closing month-end late, the efficiency of the business is affected in several ways:
Firstly, it makes it difficult to send out accurate invoices promptly. And if you don’t send out invoices, you are not going to get paid. The payment terms start from the day the invoice is received – so you are compounding the problem of late payment. Adding a month to what may already be a 60-day cycle affects cash flow. That means you don’t have that money available to invest and scale – it may also mean you have to borrow money, which creates an unnecessary cost for the business.
If you are leaving periods open – or worse still, reopening them after closing them, it is difficult to ensure that the data you are relying on to run your business is accurate. This problem is actually compounded if you introduce a Professional Services Automation (PSA) solution to automate your business. PSA is an automated system, and it builds revenue forecasts and so on from the data that has been put in. Without accurate and timely data, your forecasting will be shoddy at best.
3. Planning For The Future
The main issue with failing to close periods sharply, is that this affects your ability to look forward. If you don’t get the data from last month until half-way through the next month, that affects your ability to make smart decisions for the future success of your business. Problems get pushed forward and only compound. It also makes it hard to share accurate and timely information with customers and key stakeholders. This affects your ability to build long-term relationships with your clients and increase your repeat business, both of which are important to the future success of your business.
The good news: A PSA solution can simplify month-end close
By adopting a PSA solution, an organization can greatly improve their month-end close process and resolve the aforementioned problems.
Here’s a few ways that PSA can help:
1. All your data in one place, for everyone who needs it
One of the important points to remember here is that your business data is not only the property of the finance team who want to use it for accounting purposes. It is also important for operating the business at every level, meaning your sales and services teams need access to it as well.
With a PSA solution, every team will have access to real-time data that will allow them to do their job as efficiently as possible.
2. PSA simplifies timesheet completion
A well-built PSA solution, like Krow PSA, enables services teams to easily enter their timesheet data anytime, anywhere.
This will empower your services team to keep their timesheets up to date, rather than having to chase your employees at the end of every month to fill in their time, often delaying the month-end close process.
3. PSA helps share responsibility for month-end close across departments
We recommend as good practice sharpening the month-end cadence by getting project managers to help close the weeks. Project managers know what is happening in their engagements. If there is a difference between what was supposed to happen and what has happened, the project manager should be aware of this.
When project managers are responsible for closing the weeks, they will make sure that timesheets are filled in and available. The same goes for milestone dates, resourcing requirements, etc. This all means that closing the month is less onerous and can happen within a day or two of month end.
4. PSA can be integrated with your back-office
We recommend looking for a PSA solution that can be integrated with the solutions that drive your services business. This includes pre-built integration with your back-office accounting or ERP application.
By integrating your PSA with your back-office, you can ensure that invoices and other important billing data makes its way into the accounting application in real-time, enabling your accounting team to collect on outstanding balances efficiently, and close the month in a timely manner.