Monthly Financial Closing Plan

Does your company always seem to be late getting monthly financial statements? The solution may be simpler than you think.

A Case in Point

Several years ago I took on a new client. When I did so the individual who had been doing what I would be doing spent just a few days familiarizing me with his routines. As he was doing so I kept thinking something was missing. Actually there turned out to be several things missing.

For Starters

After I fully took over what was missing began to become apparent. First, there was no set monthly financial closing plan routine. As a result, everything seemed to be a case of “just perform something when it feels right or when it occurs to you” What that produced was a chaotic process that made it highly unpredictable when financial statements would be available. So, what was the solution?

A Written Schedule

You probably heard that people who put their goals in writing are much more likely to accomplish them. The same applies to financial closes. So, for this client I took the time to closely study what steps were required to produce monthly financial statements. Then I created a list of those activities, essentially in the order they needed to occur. I say essentially as there was some wiggle room. This financial closing plan alone made it possible to stay on track and not get distracted by other things that might seem more interesting.

But That’s Not All

You’ve undoubtedly heard an infomercial where you are told about all the great things you will be getting, only to hear the announcer say, “But wait, there’s more.” Well, quite frankly, in the process of examining the closing process and creating a written closing schedule/plan, I also was able to identify some bottlenecks. One I recall that had really slowed things down was waiting for invoices from vendors. By using receiving documents and other information, I was able to accrue these liabilities without having to wait for vendor invoices. This alone shaved several days off the closing process.

Another benefit of creating a deliberate process and examining it was that it forced me to take a closer look at just how and when things were being recorded. What I found out was that some expenses were not being recognized in the correct accounting period and some purchases were incorrectly recorded. This was a nuisance to correct and involved revised financial statements and having the outside CPA firm prepare amended income tax returns.

The Bottom Line

Merely by closely examining the monthly close process and creating a monthly financial closing plan, the time to produce financial statements was reduced from around two weeks to 2 or 3 days. At the same time, the accuracy was greatly improved.

Does your company have set routines for monthly financial closes? If not, I encourage you to create one. You might be surprised at how much more efficiently you will operate.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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