Since Microsoft Dynamics NAV has its own unique ways of dealing with month end, we want to continue to ensure that best practices are maintained in the face of employee turnover or business change.
The level of effort a company puts towards their month-end closing process varies. Having supported a number of businesses through the month end close process, we have a strong understanding of what these best practices look like in action.
Related Blog Series: Mastering the Month End Close Process with NAV Blog Series
In order to drive improvement and improve your month end close proficiency with NAV, you need to identify where your business stands. Below we have a scale ranging from low, medium, and high to help you determine where your company fits on the Month End Maturity Scale with NAV and what steps you can take to improve your processes.
Month End Maturity Model with Dynamics NAV
You rate low on the scale if you are experiencing:
High employee turnover and no clear training processes or accountabilities
- No dedicated finance or accounting staff member
- Focuses on bank accounts or lines of credit/loans but fails to reconcile inventory or other control accounts
- No formal month-end checklist
- Running a shadow or legacy ERP system resulting in duplicate entry and poor reporting
- Lack of user permission sets
For organizations with high turnover, it’s possible that many users will not be familiar with NAV as an application or the business itself lacks a dedicated finance or accounting person on staff. This is often a factor that keeps organizations on the low end of the maturity scale.
Organizations that focus on bank accounts or lines of credit/loans but fail to reconcile inventory or other control accounts like AR or AP may fall into this category. These practices put businesses at risk of overstating or understating their payables. At this stage, a month-end checklist may actually be a foreign concept.
TIP: One way to validate if you have poor controls is to run the GL table, take off all the filters and then apply a posting date filter for everything starting next year. If you have any values in there, this may be a symptom of poor control. Often, you will find that there is a posting in the future or the past (i.e. 3015 instead of 2015).
You rate high on the scale if you are experiencing:
- Extremely accurate and efficient reporting processes
- Different resources performing different tasks
- Clear month-end checklist
- Re-issued stale-dated cheques
- Validated control accounts and no direct posting to control accounts
- Bad debt write-offs to a regular rhythm
- Regular vendor and customer maintenance
A well-oiled machine, the organization with high proficiency has a checklist, has resources assigned to it, and ensures that processes have been completed before moving on to the next task. In addition, they tend to have different resources performing these tasks to ensure that they have a number of eyes on the entire close process as a means to drive accuracy.
In terms of the actual activities that suggest a high level of structure, organizations at this level are likely re-issuing stale-dated cheques, validating control accounts to ensure that they do not have direct posting to them, and are performing bad debt write-offs – perhaps quarterly or annually.
This segment is also highly skilled when it comes to vendor and customer maintenance. They take time to investigate and update records whether through performing credit checks, ensure addresses are accurate, or search for duplicate master records such as vendors and customers. As a result of this structure, organizations at this stage tend to have extremely accurate and efficient reporting processes.
Not Sure Exactly Where Your Business Fits?
Contact us and we will help you assess where you land on the scale.
How Do You Move Up?
Low–Medium
Focus on developing a month end checklist and work on developing an order of operations with resources assigned to each task. At the beginning, you will likely need to do some cleanup as there is a possibility that you have direct postings open on control accounts where they shouldn’t be. Ensure that posting dates are properly used to limit access and postings. Begin to build your month end check list and add to it if one already exists.
Consulting a CA or auditing firm to perform a proper cleanup would be a recommended strategy.
Medium–High
After isolating your specific weaknesses, first steps would include introducing some checks and validations around the GL account. Get a handle on your direct posting and continue to build on your initial month end checklist.
In addition, start developing checks and balances around vendors and customers to reduce risk from a fraud standpoint. This can be achieved by doing periodic credit checks to validate that vendors are still in business and have not gone into receivership. With customers, it will also be important to do this to reduce the risk of what’s on your receivables.
In Summary:
While increasing your month end proficiency is important, it’s also valuable to monitor your processes with support services. Turnover and process changes can always pose a risk so we recommend that you maintain your proficiency as an organization.
Evaluate your practices on a quarterly basis and be prepared to tackle current issues or put together plans to increase proficiency.
About this Series
Like most ERP solutions, there is a unique way of helping businesses complete the month end close process in Microsoft Dynamics NAV. Leveraging what is specific to NAV, I’ve put together a series of posts that will help you draft your own period-end checklists, covering the following areas:
