This week’s Thought
Accountants have been "closing the books" since the profession was formed. Even with all the advances in
Jon shared 7 practical best practices that drive financial close optimization:
- Get Buy-in Throughout the Company
- Key internal and external stakeholders in the close process need to understand "the why" before getting to "the what and how" of improving the financial close
- Change the Mindset of Your Accounting Staff
- Don’t make it all about speed and apply too much pressure to just “go faster”, tolerate a level of ambiguity, and determine the optimal tradeoff between timing over precision
- Uncover and Tackle Your Big Rocks
- Identify the toughest numbers for your company to generate each month (your Big Rocks) and determine how to make these numbers less painful and time-consuming to produce for each close
- Make Technology Work for You
- Technology is not a “one-size fits all” for companies.
Excel or QuickBooks may be what you need to help drive your close efficiency, but you should take a look at cloud-based financial applications if you have any doubts that your company has (or will) outgrow Excel orQuickBooks .
- Technology is not a “one-size fits all” for companies.
- Manage Your Materiality
- On some level materiality defines your close engineering tolerance for estimates that can be adjusted in future accounting periods. The more accounting items you have that materially impact your company’s financial results the more attention to detail you need to pay to each and every G/L account.
- Your goal as an accounting or finance professional should be to add value, impact the bottom line, and lower the number of material items you need to deal with each close.
- Sharpen Your Senses
- Know your numbers inside and out to catch errors before you “share” the close numbers with company leaders.
- A few tips include building in high level proofs that involve automated as well as manual checks that key numbers “tie” out, creating a one page financial summary, and creating a one-page narrative explaining the numbers presented in the summary.
- Raise the Bar High
- Challenge stakeholders to share what they would do if your company had to close the books in one day. Ask each stakeholder: What would you do? What would you need from whom and/or which systems to make this happen. This exercise helps identify areas of potential improvement in terms of speed, but again, it is not all about speed, it is about a faster and more accurate close.
How do companies make a fast and accurate close actually happen? Jon offered attendees actions to take as well as the theory of how to improve close effectiveness. Specific advice from Jon includes:
- Setting Goals for the Close
- Specific goals for consideration include producing numbers in a more timely manner, improving the relative accuracy of key numbers, presenting results that are easier to interpret, and adding value after the close in terms of explaining the numbers to company leaders (what is driving them and why)
- Understanding and Managing The Human Dimension
- Assess the skills of those currently working on the close
- Do you have the staff to implement the changes you want to make? If not, do you train them up, bring a consultant, or hire a new staff member?
- Do certain staff not respond well to pressure to do things more quickly?
- Do certain staff have an aversion to technology or change in general?
- Designing a Framework for the Fast Close
- Understand how to tackle your company’s Big Rocks
- Use Input from Results of Challenging Staff with a One-Day Close Scenario
- Know and manage your company’s accounting materiality
- Gather information as soon as possible and post as many entries as possible to the G/L early
- Learn from past mistakes in closing your books
- Collaborate with professional colleagues to find out how they drive close effectiveness at their companies
- Finding and Optimizing the Right Technology
- Make technology work for your staff
- What features does your staff need versus what they want
- What technology you need depends on the staff you have to leverage it
- Right-size technology solutions for your company’s complexity which can include your industry and company specific needs
- Migrating and not Rushing Towards a Faster, More Effective Close
- Tighten the close timetable gradually
- Strive for progress and not perfection
- Buy time where you can by introducing preliminary results via flash report that many include non-financial information, and offer preliminary financials (soft-close)
Closing the books will always prove challenging, but knowing how to ask the right questions and then aligning the right people with the right processes and right technology for your company can deliver the best possible close each and every time.
You can lean more by viewing the webinar recording of The 7 Keys to Unlocking Accounting Close and Reporting Effectiveness .