Let’s continue our discussion from last week about what might be some obstacles to closing our books in a timely manner.
1. Too many transactions pour in at month end:
This is symptomatic of companies with ‘satellites’, off-site locations that might be hand writing paperwork such as bills of lading and sending them in via mail or e-mail. It could also stem from personnel who lack knowledge on how to handle exceptions in the system. Credit Memos pose their own unique challenges in many systems. Does this sound familiar? What is called for here is an ‘internal investigation’ that can identify the root cause.
2. Multiple offsite locations disrupt flow of transactions:
While #2 might seem redundant based on #1, the point is that when you have multiple locations who have month end paperwork to submit, reports, spreadsheets, etc. with personnel at these locations who are not really focused on speeding up month end (we’re way too busy to stop what we are doing and get you that ‘number’, ‘report’, etc.) you have a problem. It’s time for a visit or some kind of meeting, in person or on a conference call. If offsite personnel have not ‘bought in’ to the need to close rapidly then you have a training issue(s).
3. Attempting to make accruals and other adjustments at month end that management feels should be reflected.
I’ve seen this problem more often than not. And, I have been as guilty as others of pushing these adjustments to the very last day. But regardless of guilt or innocence, it slows things down and that’s what we have to face. Do you have a Balance Sheet account where you throw everything you don’t know how to handle or what G/L code to use? We called it a ‘Clearing Account’ and assigned one of our accountants the task of monitoring the account all during the month. It helped clean up a lot before last day of the month.
4. Staffing Issues:
If you are short staffed, and many accounting/finance departments are, then you need to find a way to automate as much as you can and to strip out processes and procedures that are no longer significant error checking or monitoring functions. By this I mean that you have to identify obsolescence within your closing process. Is there anything you can jettison that once was important but no one cares about now?
5. Outdated Software and Hardware:
I know that spending on I.T. is about as much fun for companies as spending on their power bills. It’s a costly and you can’t really put your arms around it. Every year programs get bigger (or more bloated), data storage starts to fill up, servers are aging out and to fix all this can require a large investment . If you, as a controller, are in charge of I.T. as well, I sympathize with you. But, you must make the case that aging software and hardware is costly. If you are adding to your staff because you don’t have enough people to do the manual accounting work……………..well, there is something wrong with this picture.
I think that’s enough for today. Tomorrow I’ll post Items 6-10 (Part III).
Controllers need to remember that the Closing Process is composed of a lot of moving parts. How fast do you think you are performing your month end closing functions?