Following up on the last few posts on Month-End closing it’s time to get your arms around the entire closing process.  I believe in this case we need to start at the end and not the beginning.

Below are my recommendations:

  1. Create an Agenda for your ‘Post Closing Meeting‘.  Personally, I think there should be a staff meeting every month right after closing that addresses all issues that arose during the process.  As the closing process improves, the meetings will become less time consuming.
  2. Gather all staff involved in the closing process within one to two days after the closing is totally complete.  Have them bring all checklists and instructions as well as other notes that they think is relevant.
  3. Ask each staff member to be ready to ‘report’ any findings (good or bad) that may have affected the close process.  I recommend letting staff members speak first in a ’round table’ session.
  4. If you can, use a flip chart/board to list the issues that arise.
  5. When issues are identified, you may need to handle them or assign them to someone to investigate.
  7. Morning meeting – bring doughnuts.  Afternoon meeting – bring cookies.

For example, during the ‘Post Mortem’ you discover that your Accounts Payable department continued processing expenses into the system for the current month after the month end cutoff but before you actually closed the books.  In other words, somebody will most likely need to accrue into the next month these expenses or, if still possible, reverse and have rekeyed in the new month.

The question becomes for your post-mortem …… why did this happen?  Was A/P not informed of the impending cut-off?  Errors are time consuming.  So how can you drive out such time wasters?

What if a key staffer was out sick, or otherwise absent during the process?  Did everything come to a screeching halt?  Is anyone cross trained to perform those duties?  If not, there’s a problem sitting squarely in your lap.

Let me point out that ‘post-mortems’ should always be a learning experience and not just for your staff……for you as well.

As a controller, most of your life is spent being reactive.  If you don’t believe that, make a list tonight of all the things you want to accomplish tomorrow.  Put it on a time sheet.  For instance, 8:00 a.m. – finish Segment X G/L account review – 9:00 a.m. – Read lease for new copier – 10:00 a.m. – call a Vendor about a problem……………….then, I challenge you to get all of these things done, in that order and on time.  I’m going to gamble and say you won’t.  The truth is ‘the day owns you’ and not ‘you own the day’.  Agree?  I believe that my ‘post-mortem meetings’ are not reactive.  They are proactive if you follow through to see if needed improvements are made before the next month end close.  Try it.  Let me know how it goes.


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.


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?

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