Building Blocks of a Successful, Financial Close Process: Follow These Tips to Increase Accuracy and Reduce Surprises
Financial close systems, processes, people and their interconnectivity can be complex, but successful improvements to the process can be achieved by introducing some simple building blocks that are inexpensive to implement. Regardless of company size or complexity, all successful financial close processes require continuous communication, comprehensive documentation and a flexible, responsive organization. The degree to which each building block is implemented will vary based on company size, type of industry, availability of resources and management commitment. However, omitting one or two of these building blocks may re suit in some type of failure during a month-end close. COMMUNICATE It is natural to assume that the intended audience of your financial close communication plan includes only the financial types: accountants, bookkeepers, treasurers, business unit heads, financial analysts, CFOs, controllers and others closely associated with the close process. While it is critical to include people in these roles in those communications, it could be fatal to a month-end close to include only these people. The larger or more widespread the organization, the wider the communication net should be cast. Providing communication via multiple channels and mediums will be rewarded through lower overall risk. Gather and update contact information. Include all participants in the month-end financial close process. Don't forget consultants, subcontractors and suppliers. Information collected should include home emails, mobile phone numbers and alternate phone numbers. Publish a financial close calendar. The calendar provides a year at a glance so you can plan around holidays and vacations, and avoid potential internal and external business disruptions. Alert partners outside of the financial close process of key dates to avoid conflicts with system upgrades, maintenance, company picnics, training events, fire drills and building events. Send vendors and other third-party service providers an appropriately worded cover letter of the financial close dates and other information. The calendar should provide contact information for escalating problems during the close process for each business unit, location or country Include email, office phone, mobile phone and any other internal communication channels such as instant messaging details. List hours of contact and alternate contacts. Include dates and times for when the financial systems can be operated and updated. Publish cutoff times for general ledger or other key systems in the local time zones. Hold month-end close conference calls. You should hold a call each day of the close process to gather feedback on progress, and to allow for issue escalation and sharing of any key information. Use the call to track issues and provide feedback to all participants on the progress or status of all relevant issues. Provide instructions. Include a quick review of the close process at a glance via passive (website) or active means (email). Publish an exception hierarchy. This includes materiality thresholds and methods (approval template) for seeking approval of post-close adjustments for financial line corrections. Hold a post-mortem meeting. This post-close meeting should be held in a timely manner to review issues and key performance indicators (KPIs). It should include a discussion that helps the organization learn from its financial close practices. All communication, methods of delivery and feedback mechanisms may be in place but will be ineffective without the knowledge and experience of the workers executing the financial close. To overcome this limitation, successful organizations reap the knowledge of their investment in employees through various forms of documentation. [ILLUSTRATION OMITTED] DOCUMENT When practiced and integrated into the financial close processes, a strong internal control environment will improve month-end accuracy and remove barriers to timely completion. …