Three things for a faster month-end close

I've seen many month end and year end cycles and I've come to the realisation that there are three things that are common among the good ones.

During my time at Grappler, working with insurers and MGAs in many different markets, I've had a front row seat to how finance teams close the books. I’ve supported literally hundreds of month end cycles. And the difference between the teams who find month end genuinely manageable compared to those who dread it, is glaringly obvious. It almost always comes down to these same three things:

1. Clean data goes in every day

This is the one that surprises people. The most important month-end best practice sits with your underwriting or policy team, not finance.

Every policy that gets entered incorrectly, incompletely, or late creates a problem that compounds downstream. Components that don't add up to the total, commissions that can't be calculated correctly, payments that end up unmatched or sitting against the wrong policy - these are all common things we see often. By the time they surface at month end, it's ten times harder to untangle them than it would have been on the day they were written.

The teams that have a clean close have built a culture of data discipline at source. Policies entered correctly, completely, on day one. It sounds simple because it is, but it requires someone to own it and make it a priority. One of our customers had a data problem that went unnoticed for months. It was only when we loaded their historical data that we discovered they’d been paying commissions on policies that hadn't been fully reconciled.

Unallocated cash is money received that hasn't been matched to a policy yet. Most finance teams know it exists but few review it as frequently as they should.

The most common reason cash goes unallocated is that the policy isn't there yet - a broker receives a premium payment but the policy has yet to be written, which means the money that lands in the account sits unmatched. Another common scenario is when policy details are not entered correctly. It might be that the admin fee or a commission component is missing, or has the wrong values. 

Checking and clearing the UAC queue should be a quick daily task to catch problems early, when they're easy to fix, rather than at the end of the month when the flow on effects often end up requiring full investigation.

 

 A variance isn't necessarily a problem. It's a signal that something is out of the norm and needs looking into. Things like cross-period entries, policy updates and exchange rate movements can all create legitimate variances. The goal isn't to eliminate variances, it's to understand and account for why they happened.

 

If you’re not reviewing variances as they happen, making sense of them at month end can be a nightmare. I can think of one customer who was writing policies in multiple currencies. At the time of writing the exchange rate sat at one level. By the time the customer paid, the rate had changed. So the amount received in local currency didn't match what was originally written. In this instance Grappler handled the logic to dynamically calculate the exchange rate, dealing with the variances that would have otherwise occurred. Without Grappler, a person would have to manually calculate the variance, work out the correct amount to pass to the insurer, and account for the difference (every time, for every policy affected).

 

Finance teams that have a smoother close are generally on top of their variances. They know what's outstanding, why it’s there and if it needs action. When the end of the month comes, variances are already understood and close becomes routine. Leaving it until month end means you’re having to work backward through weeks of unexplained movement while under pressure to close the books.

 

The beauty is that when these three things are in place, year-end close becomes just another month to close – not a 12 month clean up.

 

The thing I find most striking after all these years, is that the teams who struggle most are not the ones that are aware that they have issues to sort. These teams come to us knowing something is broken, and with willingness to work to fix things.

 

But more often we work with teams who think they're in reasonable shape. They've been doing this for years. They have a process. They close the books every month (albeit painfully). And then we load their data and we show them the real picture.
No one was careless, and it is not any one person’s fault. You simply can't see what your systems aren't showing you.

 

One of the reasons customers often tell us "I didn't know I could see this" is because bringing policy, bank and reconciliation data together creates a level of transparency that simply isn't possible when information sits across multiple systems.

 

The reaction once we help finance teams to clean things up is almost always “Wow! I didn't know this was possible”. This moment when a finance team sees their full position clearly is still one I find really satisfying.

 

If you're reading this and carrying the scars from a difficult year end, or you’re already dreading the next one, it's worth asking which habits your team is missing. The fix is usually easier than it looks, but you have to be able to see the problem first.