Avoiding the Top Three Costs of End of Month Urgency
And upon the dawning of the month, the accounting multitudes did answer the call of thy most holy journal entry gods, and for seven days and nights did prostrate themselves upon the alter of the general ledger ...
In many organisations the financial close at the end of the month (EOM) has all the hallmarks of ancient ritual. To those steeped in the tradition of the financial period close, a five to seven-day period of apoplectic behaviour seems natural, though the rest of the organisation sees only a bizarre display of chaos, inefficiency and disruption.
Most organisations have a reasonably detailed process in place for the once a year task of preparing an annual budget. Once set, a common practice is to revise the budget at interim periods as a series of forecasts, often prepared at a higher level in the organisational structure than the original budget. There are many variations on this theme, which essentially treats each forecast as a 'mini-budget' – almost the same, but less detailed and having a shorter time horizon. Such an approach overlooks the important fact that budgets serve different purposes to forecasts. Disciplined planning requires that they stay out of each other’s way.