Continuing our discussion of issues related to a fast closing:

6.  Holding up Closing Process to perform reconciliations: If you are performing reconciliations of certain ‘critical accounts’ before you close your books, if at all possible, try to move the reconciliation process to mid- month, or just after all closing transactions have taken place.  Shifting these activities away from the last thing you do at month end prior to close will improve your closing process efficiency.  Every controller should use their judgment and understand what does and does not work for them.

7.  Unresolved Inventory Costing Issues: Obviously we want our Cost of Goods Sold account to be accurate (not perfect) as we close the books and produce our financial statements.  Problems in COGS ripples through your entire Income Statement and Balance Sheet.  One of the most important KPI’S (key performance indicators) is Gross Margin %.  Time spent at month end trying to correct problems can slow down the closing process.  One suggestion is to run reports on sales and margins weekly and assign someone the responsibility of checking through to see if margins look distorted.

8.  Lag time related to posting customer payments on account: I know what you’re  thinking.  This sounds more like an Internal Control problem than a month end closing issue.  However, in some industries, payments on account may not be so straight forward.  If you’re using a lockbox, are you waiting on reports from the bank to apply cash?  Do you have multiple locations taking customer payments?  Sometimes personnel are not quite sure how to apply a payment.  Is unapplied cash involved?  Is your Accounts Receivable department understaffed or overwhelmed?  If you’re having this problem, it’s time for one of those ‘root cause analyses’.

9.  Too many spreadsheets or other systems with interfacing data being fed into the system: This is a minefield all its’ own.  As companies grow, expand operations, increase their number of locations, often time all of this growth is not smoothly integrated.  You end up with interface issues, people sending in month end work for someone to input, etc.  This requires a lot of accounting staff time chasing down all the moving parts of your company.  As a controller, if it is within your power to improve or fix this,  you need to give thought to how that can be accomplished.  Work with what you have first.  Can your software vendor help you integrate some of these ‘outliers’?  Assemble your staff and brainstorm a solution.  Are you Controller & staff?  Talk to other controllers, but again, your software vendor may be your best first step.

10.  Failure to recognize how critical timely month end closing is to management.

When growing a plant, you may do everything right, water, sunlight, fertilizer.  But if you do just one thing wrong, for instance use the wrong soil type, then nothing else matters because the plant will die.  We call this ‘the limiting factor’.  Think of a barrel.  It’s a good barrel.  Well built with solid wood planks.  There’s just one problem.  One plank is missing.  Can you fill it with water?  No.  That missing plank is the ‘limiting factor’.  So too is ‘Failure to recognize how critical timely month end closing is to management’.  If you think that management is overly focused on month end close and that your staff has better things (or you) to do then you are part of the problem.  In the new age we are living in, if you don’t think speed is essential then you need to become more educated about issues in the accounting profession.

Next week we will delve into an after closing process that all Controllers should practice.

Calling all Controllers & Accountants to reply!!!

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