Quick Close

Webinar
Could You; Should You,
Close in One Day?
Written by

John L. Daly
Executive Education, Inc. MBA, CPA, CMA, CPIM
(734) 475-0600
Page 1

Objective
• Provide participants insights into
how to perform a month-end
financial statement closing faster,
better and cheaper.

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How Fast?
• U.S. average – 5 days
• World class – under 3 days
• Best – 1 day

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 Terminology
• Hard Close
• Soft Close
• Quick Close (Fast Close)
• Virtual Close

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Change Principles
The Principle of Inertia
It’s easier to leave things the same than
to change them.
The Empire Will Strike Back
The system is perfectly aligned to give
you what you are currently getting. In
order to change anything, you
sometimes must change everything.

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Causes of Slow Close

• Waiting for vendor invoices
• Getting inventory/CGS right
• Awkward revenue recognition
– % completion accounting
– Professional service billings
• Complicated discounts/rebates
• Processes with poor automation
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 Key Questions
• Can the process be:
– Eliminated?
– Automated?
– Done earlier?

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Error Elimination
• Key issue
• Eliminating errors before month end
will substantially reduce the amount
of work needed after month-end.

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Get the Basics Right

• Software selection and installation
• Standards
• Database set-up
• Chart of accounts
• Account reconciliations

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 Systems Questions
• Is it installed correctly, completely,
and intelligently?
• Are modules integrated the way
they were intended?
• Are users knowledgeable and
properly trained in the software
that they use?

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Software Selection
• 3 Questions:
– “What does the software do?”
– “What do you need software to do?”
– “What software provides the best
overlap of your needs and its
features?”
• Worth spending a lot of time
understanding before buying.

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Software Selection (cont’d)

• Should have real time updating.
• Modules that are integrated, not
interfaced.
• Strong ability to specify and limit
access and update data.

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 G/L Software
• Does software allow flexible,
hierarchal account numbering?
• Can reports be easily created and
modified by user?
• Is there easy integration of output
measurements with financial data to
calculate metrics?

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Systems Architecture
• Increasingly makes sense to
house data at HQ server.
• Automate interfaces.
• Reduce “instances.”
• Standardization efforts rewarded:
– Debate best practices rather than
take biggest division’s methods

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Standards
• Garbage in, garbage out.
• Is there a rigorous standard for:
– Account numbering?
– Product or job numbering?
– Vendor and Customer IDs?
• Do all parts of the business use
the same standards?

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 Data Base Set-up
• Assigned responsibility for master
file set-up and maintenance.
• Clear understanding of fields
used and what they represent.
• Routine review for data accuracy
and completeness before ME.

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Structured Chart of Accounts

• Highly organized, standardized.
• Hierarchal (CC-LLL-AAAA-DD)
• Standard set of account bases
assigned to every department.
• Detailed article on our website:
http://www.ExecutiveEducationInc.com/freestuff.shtml

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Other Identification Standards

• Examples:
– Job number
– Part number
– Vendor ID
– Customer ID
• “Formatted” systems work better
unless ID is affixed to product.

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 Reducing Closing Time
• Develop flowchart or timeline
• Think of as small projects
• Determine critical path
• Choose critical path project
• Timeline template available on
website

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Develop Closing Timeline

• Develop timeline of closing tasks
Business Day
Area -3 -2 -1 1 2 3 4 5 6 7 8 9

AP
AR
G/L
Invent.
PR

Account Reconciliations
• Most done after soft close.
• Requires:
– Reliable transactions systems
– Strong budgetary control
– Discipline to investigate errors and
prevent them at their source

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 Cash
• Get bank information online.
• Can be reconciled at any time.
• Increasing electronic activity
makes frequent reconciliations
more important.
• Reconcile every day?

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AR/Sales
• Sources of problems:
– Slow time collection (services)
– Waiting until month-end (services)
– Percentage of completion accounting
(construction)
– Complicated rebates (wholesale)
– Consignment inventory (mfg.)

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Inventory
• Single database.
• Perpetual with cycle counts.
• Current transactions recording.
• Review exception reports and
inventory lists prior to ME.
• Current cost set by P.O.

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 Inventory Standards
• Review rates prior to ME.
• Avoid unneeded rate revisions.
• Set realistic labor rates:
– Sandbagging causes distortions
– Easily beaten standards promote
laziness

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Fixed Assets
• Should depreciation be:
– Estimated or calculated?
– Calculated every month?
– Taken the month an asset is put in
service?
– Mid-month convention?

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Accounts Payable
• Holding AP open for invoices?
• Define standard items purchased.
• Use purchasing software.
• Recognize quantity at receiving.
• Use software to evaluate receipts
without invoices.

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 Accruals
• Payroll
• Worker’s Compensation
• Utilities
• Interest

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Debt
• Consider using two accounts for
term loans
• Use automatic payments
• Keep informed about interest
rates.

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Allocations
• Why allocate?
• Simplify financial accounting
allocations.
• Remove cost accounting
allocations from GL.

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 Reporting
• Analyze real user needs.
• Avoid Excel reports.
• Use metrics driven control:
– Cost/unit for cost centers
– Also revenue/unit & margin/unit for
profit centers

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Continuously Improve
• Software gets better all the time.
• Methods continue to evolve.
• Subtle refinements can often
create vast time-savings and
increased utility.
• Continuous improvement
depends on continuous learning.

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Executive Education, Inc.

John L. Daly
MBA, CPA, CMA, CPIM
John@ExecutiveEducationInc.com
734-475-0600

Visit our Website at

www.ExecutiveEducationInc.com

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