Tip of the Week

Week of Feb 20, 2017: Close your books quicker – Part 3

This week’s tip is being published late because I have been spending my time helping clients start to prepare for their February close. On that note, we will jump into Part 3 of this series. Also below are links to tips from prior weeks in this series: Part 1: Reconciling your accounts Part 2: Accounting for Unbilled activity & Bills not received Part 3: Do today what you can do today! It is easy to compartmentalize our tasks and days in a fashion where we create bottlenecks for ourselves and companies. One prime example of this is conducting period end closeouts. Many of the companies and people I have worked with wait until month end to conduct any of their “closing tasks”. These tasks could be bank reconciliations (see part 1 of this series), waiting to get vendor statements (see part 2 of this series), or any other tasks such as inventory counts or preparing reports. The problem with waiting for month end to do all these tasks is the daily functions of the business do not stop just because the month or the year ended. There are two points I want to emphasize here. First, if you wait until month end to do ALL month end tasks something has to give. You either have to work extra hours, some other daily function has to go undone, or the closing process drags out until the middle of the following month. To spread the impact of any of these scenarios, it is best to find which tasks in the closing process can be done before month end AND do them before month end. For example, use cycle counts for your inventory vs one physical inventory once a month. Or you can start updating month end reports with information that becomes available throughout the month vs having to do it all at once (i.e. payroll info). By shifting your workload you can basically make your month end process a continuous system. Next, do not “staff up” with full-time personnel just to be able to handle a monthly close or peaks in your work load. Your finance / accounting departments are cost centers unless you are an accounting firm. Accordingly, you need to staff these departments to meet the reporting goals of your company but should do so in the most cost effective manner. One solution to “staffing up” is improving your internal processes and data flow to remove un-necessary steps in your daily and monthly activity. Another solution is to bring in interim help for the items causing “peaks” in your work load. If the items causing peaks are clerical duties, a temp worker or intern might be the solution here. However, if the “peaks” are caused by reporting or analysis of information an interim CFO / Controller would probably be the best alternative. In conclusion, identifying the “closing tasks” which can be done before month end will greatly improve your close out time. Likewise improving your internal processes can remove “choke points” which exist in both your daily and monthly processes. Then bringing in outside help can provide a cost effective solution to adding full-time staff. Key Takeaway: Identify tasks which can be done on an ongoing basis and match your cost center staffing needs to the needs of the business. Please email accountingtips@integrated-accounting.com if you would like additional information or have any questions.