Speeding Up Your Month-End Reporting Process
Quick month-end reporting has been around since the early 1990s, when forward-thinking CFOs starting looking at the concept of Day One reporting, a concentrated effort to complete accounting processes and deliver management reports the first day after the previous month-end.
The benefits of a fast close are numerous, not the least of which is the inherent cost savings. With a quick month-end, departments can maintain greater budget control and gain earlier insight into results. Reports are more succinct, and with less time invested in month-end processes, management can spend more hours analyzing trends and making course corrections.
The finance team benefits as well. By removing inefficient month-end practices, productivity increases and staff can be expected to have more time to be involved in activities like quarterly rolling forecasts and project work.
So, what’s not to like? We all want a fast close, right? But how does your accounting department condense month-end processes and create greater efficiencies that can lead to speedier closes without compromising quality, integrity and completeness?
A couple tips:
Owners, CEO’s and CFO’s must accept the premise that monthly accounts are not precise documents; they can only be a true and fair view and error-free. Assessments and reasonable estimates will need to be made. The month-end financial report should be concise, consistent and not delayed for detail.
Streamline activities wherever possible. Process accruals and fixed assets before month-end and close the accounts payable ledger quickly thereafter. Close off accounts receivable at noon on the last working day, with afternoon transactions carried forward to the first day of the new month.
Move up cutoffs wherever possible. Close off capital projects at least one week before month-end (treat any equipment arriving in the last week as if it arrived the next month) and cut off month-end inventory immediately at the close of business on the last working day, with all last-day production carried forward to the next month.
That’s all by 5:00pm the first working day. What happens, though, in the next 24 hours is critical.
With all cutoffs done, management should review the numbers and look for problem areas. Give budget owners until noon to complete their commentary and review on major variances. First thing next morning, have the accountants discuss areas where further work is needed to ensure the numbers are “true and fair” and have them meet again that afternoon to make any adjustments. Finalize the numbers and issue a flash report by close of business. That’s good practice. There’s not a CEO alive who wouldn’t welcome a heads-up number on such a timely basis.
Once the flash report is issued, continue recording any adjustments found in the relevant “overs and unders” spreadsheet and assess which adjustments are worthy of processing. Make no changes until the entire review is complete.
Then focus on the reporting package. Again remember, “a true and fair view and error free.” Once you’ve reached that point, allow no adjustments unless they’re very material. You’re then ready to provide the CEO with a “flash P&L” within a few days of month-end so he or she has a snapshot of the past month.
Most of the tasks from Day Two onward involve report preparation and quality assurance work. And that’s it. Once everybody gets used to the new routine, you’ll likely see the error rate shrink. Your people can then have more faith in the numbers and will spend less time checking them.
For help on how to improve your month-end reporting process, contact Kaplan CFO Solutions.