By Sahibzada Behram Khan.

When firms are polled about the duration of the close process, the responses vary widely. However, pinpointing where the majority of time is spent reveals a common theme: more often than not, it's the laborious data manipulation—not the cognitive decision-making—that eats up the hours.

This insight is fundamental for firms looking to streamline their processes through automation. The piecemeal nature of many closings tends to be a result of repetitive procedures that haven't been documented or automated, forcing professionals—often the highest-paid team members—to perform these tasks manually each closing period.

Distinguishing Types of Work

In the context of the month-end close, every task generally fits into one of two categories.

The first category comprises deterministic tasks, where the same input consistently yields the same output. Think of exporting trial balances, matching cleared items to bank statements, and periodically updating schedules. These processes involve minimal professional judgement; instead, success hinges on meticulous execution.

The second category demands judgement, like assessing the reasonableness of an accrual or investigating variances. It’s these tasks where clients derive most value, making this work essential to retain.

A clear takeaway emerges: automate the routine tasks in the first category to preserve valuable time for the decision-making moments of the second. Firms that misuse automation by purchasing systems that claim to “do the accounting” often find themselves contending with the machine's limitations, which can become more cumbersome than manual methods.

Manual Steps Still Prevalent

Several mechanical steps continue to be performed manually across most firms, even as the landscape around them evolves.

Data extraction from ledgers remains a significant bottleneck. One individual logs into the accounting system, generates a report, exports it, opens it in Excel, and meticulously cleans the data—removing header rows, correcting date formats, and adjusting account numbers. This rudimentary task often consumes the majority of closing time purely due to its straightforward yet time-consuming mechanics.

Reconciliations are another area that drags on. Matching bank, credit card, and intercompany transactions is fundamentally a rule-based process. While exceptions require human review, the majority of transactions align neatly without needing significant oversight.

The same applies to rolling forward schedules for prepaids or fixed assets; the mathematics involved is mechanical. It’s the judgement about what should be forwarded that requires human input, creating a mismatch of time and effort.

Lastly, the assembly of reporting packs—copying figures, updating templates, and verifying that statements align—demands considerable time when it could be done automatically. This step is fraught with potential errors, especially as deadlines loom.

Prioritizing Automation Steps

When it comes to tackling automation, order can make a substantial difference in effectiveness. Here's how to prioritize:

1. Start with exports. Automating the data extraction process yields the quickest returns, as every subsequent task relies on accurate data. It also mitigates frequent closing errors that arise not from poor accounting but from using incorrect file versions.
2. Next up, focus on reconciliation matching. Once data is consistently delivered, applying established rules for matching will save significant time. Ensure that any complex or ambiguous matches are flagged for manual review rather than hastily cleared.
3. Schedule roll-forwards come next. Being mechanical and repetitive, they're an ideal candidate for automation—just redo one previous period manually and compare the results.
4. Save report assembly for last. Only begin automating report generation once you have stable and clean inputs, as automating around ongoing issues only shifts the problem.

A notable omission in these steps is the judgement work—evaluating accruals, investigating variances, or reviewing estimates—which rightly remains with accountants. It’s through automating surrounding processes that firms can free up time for this critical work.

Two Key Cautions

Never automate without first documenting your processes. Automation only replicates existing processes; poorly laid-out workflows become automated inefficiencies, making it harder to identify flaws. Documenting steps can often reveal unnecessary actions that can be eliminated altogether.

Furthermore, whatever steps you automate must have a clear audit trail. If future reviewers or regulators can’t trace a transaction, then you’ve created an even bigger liability, regardless of how quickly it operates. Automation should enhance transparency and oversight.

A Practical Starting Point

Choose your most repetitive client and time the process of one closing accurately—don’t rely on memory. Using a stopwatch to log each step gives a genuine perspective on where time is expended. Many firms are surprised to learn that the decision-making moments often take less time than anticipated, overshadowed by the burdens of data management.

Use that timing sheet—not vendor claims—as your guide for initial automation efforts.

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Sahibzada Behram Khan is Founder at HISAB 360, known for developing AI and automation tools integrated within Microsoft Excel for finance teams. Learn more at https://hisab360.net.