Fast Close: A Guide to Closing the Books Quickly - Rilegato

Bragg, Steven M.

Rilegato

ISBN 10: 0470465018 ISBN 13: 9780470465011

Casa editrice: Wiley, 2009

Riassunto

Praise for Fast Close: A Guide to Closing the Books Quickly

"Steve captures the essence of the problems affecting the financial close process within corporations of all sizes; from the period close of subledgers and general ledger through financial reporting, and the relationship and interdependencies of governance, people and technology. A must-read for the corporate controller."
—David Taylor, ACMA, MBA, VP Strategy, Trintech Inc.

"Fast Close: A Guide to Closing the Books Quickly, Second Edition is a must-read for today's busy controllers. Steven Bragg points out everything that can be done outside the close that you just never realized didn't actually have to be part of the month-end close process! Very commonsensical approach!"
—Kathleen Schneibel, mba, cpa, Controller/CFO for Hire, KMAS Consulting LLC

"A well-executed 'fast close' can bring many valuable benefits to any company, from improving organizational performance to transforming accounting executives from financial historians to trusted advisors. In Fast Close, Second Edition, Steve systematically breaks down the steps required to achieve a fast close in both public and private companies, providing financial executives with tips, checklists, and a cost-effective road map to implement fast close procedures in virtually any company."
—Matthew Posta, Esq., CPA, Vice President of Finance, Key Air, LLC

FROM THE FIRST EDITION

"This is an outstanding book in which Steve reveals his secrets to a fast close. Having personally experienced his (one-day) fast close for years and enjoyed the beneficial impact on my company, I highly recommend this book for all financial officers who desire to have a large, favorable impact on their company."
—Richard V. Souders, President and CEO, Kaba Workforce Solutions

Su questo libro

Informazioni sull?autore

STEVEN M. BRAGG, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master's degree in finance from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, is an avid alpine skier and mountain biker, and is a certified master diver. Mr. Bragg resides in Centennial, Colorado. He is also the author of Accounting Best Practices and Accounting Policies and Procedures Manual, both published by Wiley.

Dalla quarta di copertina

Closing the month-end books followed by the issuing of financial statements as fast as possible is one of the most common—and time-consuming—challenges controllers face. Depending on the company, the process can take anywhere from four days to as long as five weeks. Finally, help is here! Now fully revised and updated, Fast Close: A Guide to Closing the Books Quickly, Second Edition shrinks the closing interval down to just one day.

The new edition of this hands-on guide presents the successful, field-tested principles of accounting guru Steven Bragg—using the same techniques he has personally used for years to issue financial statements for multidivisional companies.

Filled with flowcharts and checklists to help professionals avoid delays and bring accounting department closing procedures up to date, Fast Close, Second Edition straightforwardly illustrates how companies can close their financials quickly enough to issue statements within Sarbanes-Oxley's rigid time frame.

The new edition features new coverage of:

• Closing Controls and Closing for the Public Company, with a new chapter for each

• How to close faster, with checklists

• Common areas of delay and how to overcome them

• Flowcharts for how to route closing tasks through the accounting department

• How to handle information roll-ups from subsidiaries

• Those closing steps that can wait and those that need to be accelerated into the pre-closing period

Offering a compelling case for ending slavery to the month-long closing process, this invaluable resource shows accountants how to get it done efficiently, with authoritative discussion of shifting the timing of closing activities out of the core closing period; reducing the contents of the financial statements; standardizing the chart of accounts; centralizing accounting functions; streamlining the commission calculation process; and much more.

The new edition of this hands-on guide presents the successful, field-tested principles of accounting guru Steven Braggusing the same techniques he has personally used for years to issue financial statements for multidivisional companies.

Filled with flowcharts and checklists to help professionals avoid delays and bring accounting department closing procedures up to date, Fast Close, Second Edition straightforwardly illustrates how companies can close their financials quickly enough to issue statements within Sarbanes-Oxley's rigid time frame.

The new edition features new coverage of:

• Closing Controls and Closing for the Public Company, with a new chapter for each

• How to close faster, with checklists

• Common areas of delay and how to overcome them

• Flowcharts for how to route closing tasks through the accounting department

• How to handle information roll-ups from subsidiaries

• Those closing steps that can wait and those that need to be accelerated into the pre-closing period

Offering a compelling case for ending slavery to the month-long closing process, this invaluable resource shows accountants how to get it done efficiently, with authoritative discussion of shifting the timing of closing activities out of the core closing period; reducing the contents of the financial statements; standardizing the chart of accounts; centralizing accounting functions; streamlining the commission calculation process; and much more.

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Fast Close

A Guide to Closing the Books QuicklyBy Steven M. Bragg

John Wiley & Sons

Copyright © 2009 Steven M. Bragg
All right reserved.
ISBN: 978-0-470-46501-1

Chapter One

Introduction

Achieving a fast close is a process improvement project that requires the full attention of the accounting staff for a long period of time. Before committing to such a project, one should be clear about what type of financial close works best for a company's specific needs, what kinds of benefits will result, and the general steps required to complete the close. This chapter provides answers to these questions.

DIFFERENT TYPES OF FAST CLOSE

Several variations on the fast close concept have appeared, causing some confusion about the nature of each one. The fast close is simply an acceleration of the standard closing process, resulting in approximately the same financial reporting package being issued (possibly somewhat stripped down). The focus of this approach is a careful examination of the closing process to strip out wait times, consolidate tasks, eliminate unnecessary functions, add transaction best practices, and selectively apply automation where necessary. It is a task in which an industrial engineer trained in efficiency improvements would feel quite at home.

The soft close is less labor intensive than a regular close, because it does not generate as much information. It is designed solely for internal corporate use, so its end product is only those management reports needed to run operations. With this reduced reporting goal in mind, the accounting staff can eliminate the use of overhead allocations. It may also be possible to stop some accruals and ignore the elimination of intercompany transactions, depending on the level of reporting detail desired. The soft close is most commonly seen in companies that issue only quarterly or annual reports to outside entities, leaving all other months available for the soft close.

The virtual close involves the use of a largely automated accounting system, one that can produce required financial information at any time, on demand. This approach is rarely used and only in the largest companies that can afford to install an enterprise resources planning (ERP) system that automatically consolidates and reports financial information. Also, the underlying transactions that feed into the ERP system must be essentially error free, so an accurate virtual close is really the result of a hefty software investment as well as years of continual process improvements. The financial reports resulting from a virtual close tend to be stripped-down versions of generally accepted accounting principles (GAAP)-compliant reports, because this approach avoids the need for such manual tasks as overhead allocation, accrual transactions, and the establishment of various reserves.

If achieved, a virtual close can be useful in fast-moving industries where financial results must be monitored frequently in order to make rapid-fire changes to a company's tactical or strategic direction, or at least to identify problem areas for fast management attention.

BENEFITS OF THE FAST CLOSE

There are numerous benefits to achieving a fast close, which vary based on the perspective of the recipient-company management, outside investors, auditors, and the accounting department. These benefits are:

Quicker access to financial information. Company management generally feels that the primary benefit of the fast close is having access to financial information more quickly, allowing it to take rapid steps to improve a company's strategic and tactical position in the marketplace.

Marketing tool. A company's marketing staff can use the rapid issuance of financial information to trumpet the company's openness to the investing public. This does not necessarily mean that the company will issue sterling financial results, only that it will issue results faster. Still, it implies some level of expertise on the part of the accounting department in processing transactions and compiling them into reports, and so may impart some level of comfort to investors in that regard.

More time for financial analysis. Closing the books fast does not necessarily mean that one must issue financial statements sooner. An alternative is to spend additional time analyzing the preliminary financial statements in order to issue more complete notes alongside the financials at a later date.

Improved processes. Because the fast close improvement process requires careful attention to process enhancement, there will inevitably be side-benefit improvements to many accounting processes, leading to heightened efficiency and fewer errors. Within the accounting department, this may be seen as the top benefit of the fast close. A variety of controls for financial reporting are discussed in Chapter 15.

Improved control systems. Internal and external auditors appreciate the enhanced attention to control systems needed to ensure that information is compiled properly and fast.

More time, period. Although some aspects of the fast close simply push activities into the period either before or after the core closing period, some actions are completely eliminated or at least reduced in size. This results in less total time required for the closing process, which can be used by the accounting staff for a variety of other activities.

Consequently, the wide array of fast close benefits results in multiple supporting constituencies-management, investors, auditors, and the accounting department.

LEGAL ISSUES IMPACTING THE FAST CLOSE

The Sarbanes-Oxley Act has made it more difficult to achieve a fast close. The problem is Section 302 of the Act, which requires formal management certification of the accuracy of the financial statements. Specifically, Section 302 requires that the financial statements of publicly held companies not contain any material untrue statements or material omissions or be considered misleading. Understandably, those signing this certification want to spend more time ensuring that the financial statements are indeed correct. Some recent surveys of the time needed to produce financial statements have indicated a slight increase in the time required since the passage of Sarbanes-Oxley, probably because of Section 302.

However, Section 409 of Sarbanes-Oxley requires that public companies disclose to the public on Form 8K any information on material changes in their financial condition or operations. This must happen within four days of the occurrence of a triggering event. This requirement calls for financial and operating systems that bring issues to the attention of management faster than might previously have been the case.

Finally, the Securities and Exchange Commission (SEC) has accelerated its requirement for the timely filing of quarterly and annual reports by publicly held companies. The rule change calls for a three-year decline in the reporting period to 60 days for annual reports and to 35 days for quarterly reports (down from 90 days and 45 days, respectively). This rule applies to domestic companies having a public float of at least $75 million and that have previously filed at least one annual report.

In short, corporate controllers and chief financial officers are caught between a rock and a hard place-they must file financial and operating information sooner but want to retain it in-house longer to ensure that it is correct. The solution is still the fast close-information is available quicker for filing requirements, while company management can still retain it for further review until the accelerated filing dates come due.

STEPS TO ACHIEVE A FAST CLOSE

Several steps are required to achieve a fast close, which are addressed in detail in the following chapters. They are listed in the following recommended order of implementation:

1. Reviewing the closing process (Chapter 3). The first step in achieving a fast close is to examine the current state of the closing process and determine the time required to complete each functional area (i.e., inventory, billing, payroll, payables, and cash processing, as well as final closing activities). It is useful to summarize the results of this investigation into a timeline that can be used to spot which segments of the closing process are particularly in need of improvement.

2. Altering the timing of closing activities (Chapter 4). A set of changes that are easy to implement and yet have a startling positive impact on the duration of the close is to shift many of the closing activities either into the preceding month or into the period immediately following the issuance of financial statements.

3. Revising the contents of the financial statements (Chapter 5). The close will take less time if there is less information to report. There are several variations on this concept, such as eliminating custom reports entirely, shifting to electronic modes of report delivery, and reporting some operating or metric information separately from the financial statements.

4. Optimizing the use of journal entries and chart of accounts (Chapter 6). Journal entries require excessive amounts of time, may be entered incorrectly, and do not always contribute to the accuracy of the financial statements. Thus, standardizing journal entries, eliminating inconsequential ones, and automating them can be of considerable assistance. Also, using a common chart of accounts or at least creating mapping tables will reduce the labor associated with consolidating results reported by subsidiaries.

5. Standardization and centralization (Chapter 7). If a company has multiple locations, the closing process will be nearly impossible to improve unless the controller pays considerable attention to the standardization of accounting transactions so that they are completed in exactly the same way in all locations. Even greater closing improvements can be attained by centralizing accounting functions for the entire company in a single location.

6. Closing the inventory function (Chapter 8). The topic of inventory makes many controllers shudder, because a combination of poor controls and large investments in this area makes the cost of goods sold an extremely difficult area to calculate, leading to massive time requirements during the closing process. This problem can be reduced by implementing tight inventory tracking and cycle counting systems, as well as by adopting better materials management policies to reduce the overall level of inventory investment.

7. Closing the billing function (Chapter 9). Generating month-end invoices may be the bottleneck operation during the month-end close. This problem can be reduced by shifting recurring invoices and the rebilling of expenses out of the closing period, electronically linking the shipping database to the accounting department, and ensuring fast completion of billable hours reporting.

8. Closing the payroll function (Chapter 10). The payroll function principally interferes with the closing process because employees are late in recording their billable hours, which can be resolved through the use of automated time clocks and Web-based time recording systems. There are also several ways to streamline the commission calculation process so it takes much less time during the core closing period.

9. Closing the payables function (Chapter 11). Waiting for late supplier invoices to arrive, as well as pushing those invoices through a Byzantine approval process can seriously interfere with the month-end close. There are several approaches for streamlining the basic approval process, while the intelligent use of expense accruals, coupled with the purchase order database, can eliminate the wait for late invoices.

10. Closing the cash processing function (Chapter 12). Some controllers like to wait until the bank statement arrives in the mail before issuing financial statements, so they can first conduct a bank reconciliation. The postal float on the bank statement can be two or three days, which directly delays the issuance of financial statements. This can be avoided through the use of online bank reconciliations, while several techniques are available for improving the speed of processing incoming checks.

11. Incorporating automation into the closing process (Chapter 13). There are several ways to use automation to improve the closing process, ranging from a series of small efficiency-related improvements to workflow management software, a data warehouse, consolidation software, and an ERP system.

12. Ongoing improvements in the closing process (Chapter 16). Although the preceding action items may have achieved a considerable improvement in the speed of the close, there is always room for improvement. Consequently, constant attention to the process flow and measurement of key metrics will ensure that the fast close remains fast.

There are two other chapters that do not have a direct bearing on speed of issuing financial statements. Chapter 14 uses many of the techniques described in previous chapters to compress the separate report filing process required of public companies by the Securities and Exchange Commission. Also, Chapter 15 describes an array of controls over the financial statement reporting process. Many of these controls can increase the duration of the closing process, but are critical for ensuring the ultimate accuracy of the financial reports.

The order in which improvements are listed here (and throughout the book) is intended to focus attention on low-cost, easy-to-implement changes that have a major and immediate impact on the speed of the close. Despite requiring considerable long-term effort, inventory-related changes are listed relatively high in the priority list, because the accounting staff needs to begin work on them as soon as possible in order to achieve any benefits within a reasonable timeframe. Automation improvements are listed near the bottom of the priorities, because they are generally very expensive, require considerable time to implement, and do not have a major impact on the duration of the closing process.

SUMMARY

Although the soft close and virtual close are available as alternatives to the fast close, most companies need to issue full-scale financial statements every month, which precludes the soft close. The virtual close requires considerable resources to achieve, and so is also not an option in most cases. Consequently, the focus throughout the remainder of this book is on the standard fast close, which presents considerable benefits to the implementing company.

The next chapter outlines the primary traditional closing steps required for a small single-location company, and then goes on to cover additional closing requirements for companies having multiple locations, international locations, and public reporting requirements. This information serves as a basis for the closing enhancement activities that begin to be addressed in Chapter 3.

(Continues...)

Excerpted from Fast Closeby Steven M. Bragg Copyright © 2009 by Steven M. Bragg. Excerpted by permission.
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Dettagli dell?edizione

• Editore: Wiley
• Data di pubblicazione: 2009
• Lingua: Inglese
• ISBN 10: 0470465018
• ISBN 13: 9780470465011
• Rilegatura: Copertina rigida
• Numero edizione: 2
• Numero di pagine: 224
• Contatto del produttore: non disponibile