5 main challenges of accounting closing
Posted: Mon Jan 20, 2025 4:13 am
How does your company approach the accounting closing process? It is common to find companies that treat it as an operational procedure, almost mechanical, without highlighting the strategic and management importance of accounting as a business tool. The avant-garde business management model increasingly reinforces the high strategic importance of the accounting closing process, and the use of its indicators and results for decision-making purposes in business. Therefore, this practice has been gaining less protocol importance and more related to strategic management.
Typically, they occur every month, quarter or even year-end. In general, it is a turbulent time in the finance department, with its various activities and procedures being carried out with some urgency to meet deadlines, which can lead to stressful scenarios in the day-to-day business.
This happens because a series of strict controls are necessary for the accounting closing, and their absence can cause great difficulties in the financial analysis, as well as damage to the quality of the information that is reflected in the statements. Many of these controls – such as inventory and wear and tear on fixed assets, for example – are shared taiwan whatsapp data with other areas of the company, and are not restricted to the financial departments. Therefore, for everything to run as smoothly, quickly and correctly as possible, it is necessary for various areas of the company to understand their importance and role in the accounting closing, and to contribute to the construction of good information and controls.
We can mention five important challenges involved in this accounting closing process. Follow them:
1 – Value strategic utility
Disseminating the strategic usefulness of the accounting closing to all employees within the company – from senior executives to interns – is, without a doubt, one of the main challenges in the financial area .
An important step in this phase is to align with everyone in the company that the strategic benefits of decision-making through accounting have a positive impact on a wide range of areas and employees. It is not a one-area effort, and its benefits are not either.
Therefore, it is necessary to invest in raising awareness among employees about the importance of accounting in strategic management. And it is the role of the finance department to value their performance and share the main indicators with the rest of the company, so that everyone can monitor their contribution to generating results in the business.
2 – Accounting reflecting the business model
Above we talked about how the corporation should view accounting. But another equally important view is how the accountant should understand the business model . Since 2007, a new international accounting standard has been in force in Brazil. These are the IFRS ( International Financial Reporting Standards) , the international accounting standards.
IFRS has brought many benefits to Brazil. One relevant benefit for accounting is a fundamental principle of IFRS: “substance over form”. What does this mean?
Until 2007, we had a rules-based accounting model. Instead of deeply understanding the company as a whole, the accountant had to rely solely on the rules to close the accounts. With IFRS, however, accounting begins to better reflect the business model and specificities of each company. For a correct accounting close, adjusting the essence of accounting to your business is a mandatory process. IFRS allows for transparent disclosure of information about the financial position, performance and cash flows of these organizations, taking into account the specific characteristics of their business model.
Even today, however, it is possible to identify several cases in which those responsible for the accounting closing of companies do not know the essence of the business, especially in smaller companies. This means that the product of their activity – the financial statements – contribute less than possible for strategic decision-making purposes.
For these reasons, the role of the controller has been gaining importance and becoming increasingly important within the corporation.
3 – Organize and manage internal information
Accounting is a job that requires a lot of organization and control of information. One of the main operational challenges of closing the accounts is establishing good controls so that accounting is not a traumatic process at each closing, and occurs naturally. Controls need to be continuous and reliable.
If there is no organization and control, the accounting closing process ends up being exhausting, as it will be necessary to collect data from the past, which can be very difficult to organize and interpret, given that relevant information can be lost over time.
Typically, they occur every month, quarter or even year-end. In general, it is a turbulent time in the finance department, with its various activities and procedures being carried out with some urgency to meet deadlines, which can lead to stressful scenarios in the day-to-day business.
This happens because a series of strict controls are necessary for the accounting closing, and their absence can cause great difficulties in the financial analysis, as well as damage to the quality of the information that is reflected in the statements. Many of these controls – such as inventory and wear and tear on fixed assets, for example – are shared taiwan whatsapp data with other areas of the company, and are not restricted to the financial departments. Therefore, for everything to run as smoothly, quickly and correctly as possible, it is necessary for various areas of the company to understand their importance and role in the accounting closing, and to contribute to the construction of good information and controls.
We can mention five important challenges involved in this accounting closing process. Follow them:
1 – Value strategic utility
Disseminating the strategic usefulness of the accounting closing to all employees within the company – from senior executives to interns – is, without a doubt, one of the main challenges in the financial area .
An important step in this phase is to align with everyone in the company that the strategic benefits of decision-making through accounting have a positive impact on a wide range of areas and employees. It is not a one-area effort, and its benefits are not either.
Therefore, it is necessary to invest in raising awareness among employees about the importance of accounting in strategic management. And it is the role of the finance department to value their performance and share the main indicators with the rest of the company, so that everyone can monitor their contribution to generating results in the business.
2 – Accounting reflecting the business model
Above we talked about how the corporation should view accounting. But another equally important view is how the accountant should understand the business model . Since 2007, a new international accounting standard has been in force in Brazil. These are the IFRS ( International Financial Reporting Standards) , the international accounting standards.
IFRS has brought many benefits to Brazil. One relevant benefit for accounting is a fundamental principle of IFRS: “substance over form”. What does this mean?
Until 2007, we had a rules-based accounting model. Instead of deeply understanding the company as a whole, the accountant had to rely solely on the rules to close the accounts. With IFRS, however, accounting begins to better reflect the business model and specificities of each company. For a correct accounting close, adjusting the essence of accounting to your business is a mandatory process. IFRS allows for transparent disclosure of information about the financial position, performance and cash flows of these organizations, taking into account the specific characteristics of their business model.
Even today, however, it is possible to identify several cases in which those responsible for the accounting closing of companies do not know the essence of the business, especially in smaller companies. This means that the product of their activity – the financial statements – contribute less than possible for strategic decision-making purposes.
For these reasons, the role of the controller has been gaining importance and becoming increasingly important within the corporation.
3 – Organize and manage internal information
Accounting is a job that requires a lot of organization and control of information. One of the main operational challenges of closing the accounts is establishing good controls so that accounting is not a traumatic process at each closing, and occurs naturally. Controls need to be continuous and reliable.
If there is no organization and control, the accounting closing process ends up being exhausting, as it will be necessary to collect data from the past, which can be very difficult to organize and interpret, given that relevant information can be lost over time.