During the past week I have heard about three privately-held companies which are experiencing 60+ day closes. Two are in the process of being converted from cash/
Does your Accounting close take longer than 5 days?
Answers
We are a private company with revenues over $1 billion, and close most months in 5 days with an added day at the quarter, and 2 added at year end [except pension "funded status" recorded later to allow the Actuaries to deliver public company evaluations first]. Our "glossy" Annual Report takes a few weeks to fully de-bug, but is largely done by early February, and could be hard-closed earlier if needed.
The client I'm at takes approx 10 days to close, but there are limited resources and a complex (too) audit trail that needs to be kept.
For most of the companies I have helped ($10M-$50M), we were able to achieve a max of 2 day close,. 3 days for quarters and 4-5 at year-end. Most of the time, we can close end of day 1 after monthend..
I work for a government agency with about 2,000 employees and our monthly close takes three to four weeks. However, we are in the middle of implementing our first ERP system and are making business process improvements with the aim of reducing our close to 5-8 days.
We're a privately-held (i.e. private equity backed) insurance, administration, and services company with 7 subsidiaries (2 foreign sub locations), 3 layer consolidation and 300+ employees. We typically close a month in 8 work days with reporting the following 2 work days,
Martin, thanks for the link. It is very beneficial.
It was typical for a close to last all month when I came onboard. Way too long and not practical to make business decisions when the data was already outdated. Now, we're down to 10 days and my goal is to be at 5 business days or less by the end of the 2nd quarter. There are many inefficient processes that are being addressed one by one and streamlined.
Your post is great, provocative!
Motorola used to announce flash results day one after the month end close.
Simple entities, privately owned, should target to do it within 2-3 days, with an overhaul of processes that can impede a financial close. Multi-entity groups may go to 5-8 days, but flash reports should be available quicker.
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At a current client: The overly complex nature of the excel spreadsheet required by the PE firm takes at least a day in and of itself. Add to this inefficient processes that for numerous and valid reasons can't be changed at this point in time, it becomes near impossible to achieve a full closed in less than 10 days.
But on the other had, we did create a daily and weekly dashboard (again Excel based, taking about an 1 hr to create) that gives us insight into KPI's that were not available (even with the financials) prior. While not full results, they still gives us more than accurate enough information that is actionable.
I close in 2-3 days. I was approached by a recruiter a couple of years back who was working with a client whose close was about 6 months behind and not catching up. The recruiter and I chased that opening for a while but the owner never did switch, though they professed to be most unhappy with the guy they had.
All talk, no action.
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Be thankful you didn't get hired by that company. If the close was 6 months behind, they were unhappy, but doing nothing about it, that is an indicator that the senior executives were as much a part of the problem as the person heading up the accounting/reporting function. Maybe the senior execs were the entire problem (for example unwilling to make and stay firm on decisions that affected accounting allocations, reserves, accruals). If you had gotten the job, it is very likely that every time you wanted to make a change, you would have met strong resistance to spending money and resistance to change in doing anything differently.
It really depends on the type of business. Our close is typically 5-7 business days.
We could easily close within 2 business days, if there weren't a few hurdles in the way. One is a non-related system that has to go through its own close process before we have access to all of our revenue data. I don't have control over how it is run or how the data is input, so close timing can be almost a week. The corporate officers also implemented a channel accounting requirement with channel data that is, on the best month, only available on the 3rd. I am working with the executive team to show them how revising some internal processes could have a positive domino effect on our close and reporting accurate information.
I will admit a good deal of frustration at being measured on when financials are done when I lack control over the material information being received.
A month should close not later than two working days from the last working day of the month. However, where this delays, it is mostly related to lack of integrity in processing data or in cases where data is not posted continuously which is a big threat to the integrity of the reports.
I have work in both cases, where the month closed by day 2 and where due to attitude and lack of commitment, the month would delay up to day 7. It is frustrating if by day 5 you are still closing your month when you have an on-line system.
Team work helps a great deal. As the person in charge of closing, keep an on going check on the originators of all entries. You can even try a weekly mock close to ensure you are on track.
Instead of putting arbitrary number of days to close, why not state a close should be done expeditiously and not to exceed 30 days.
There are many reasons (valid and invalid) why a close takes more than "x" days, but what works for you may not work for me, etc.
Absolutes like specificity-based best practices are self serving because no two businesses are alike.
I agree with Wayne. Ours takes longer but there are reasons that fit only our business. In my previous places of employment a few days was all that was needed.
I worked for a large listed Manufacturing company - INOVA (Canada), and through a commitment to a close calendar and getting other departments (such as sales) to speed up information delivery we went from 20 days to 5 working days, - + 2 review days. If your company has a fully functioning ERP close is more a matter of human effort. Plus, any dashboards or KPI reporting require a quick close to be relevant
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I truly believe that setting BIG GOALS (like cutting the accounting close from 20 days to 5 days within 2 months) is the secret to achieving better than average performance. Incremental steps (like going from 20 to 15 days over 6 months) don't generate out-of-the-box ideas, while stretch goals force the group to rationalize between what information is truly critical and what can be estimated.
We have multiple systems, multiple facilities and I haven't met anyone with a leaner staff. That keeps it simple and we close in 2 days on all month ends except quarters where it takes 3 due to corporate adjustments. If someone needs a
It should take however long it takes to get the financials materially correct. It has also been my experience that being fast almost always sacrifices accuracy.
I have also found that usually a long close indicates understaffing and a lack of senior
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Scott, I have found that slowness in the accounting close usually boils down to a lack of investment in one of three areas: people, processes or systems.
I agree that there is an inherent tradeoff between timeliness and accuracy, with faster closes relying more heavily on accruals.
Does anyone have tips on making the close process faster? My office always has an issue finalizing accruals in a timely fashion, and with 6 companies being run from one headquarters, it is very difficult to keep the team on track.
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There are several comments here and after my article on LinkedIn which address the mechanics of a faster close. See Edward Thill's summary below, for example.
In a nutshell: get buy-in from stakeholders, set goals and hold people accountable, dig into the bottlenecks, prioritize informational needs, determine if people/processes/systems need improvement, and keep at it until you're satisfied with the results.
The most sensitive areas: Existing people and systems issues may be fixable or not. Meet them where they are and make a determination. Sometimes additional
I think Wayne said it best -- in essence, it should take what it takes. That's not to say we should accept the status quo but in some industries, there are barriers to the process that can't be eliminated by a mere edict for a quicker close. I work for a trading firm and certain trade information is not final until as much as 25 days after month end. We can't wait quite that long so some trades are booked on "assumed" data. Those trades must be reversed in the following month and then re-posted with final information, therefore requiring 3 entries for a single trade. This is not simply a matter of truing up a single entry but reversing and re-recording 100's of entries at the transaction level. The earlier we close the books, the more assumed information that needs to be corrected -- which only further burdens the next month. By waiting 5 business days to begin pulling the information, we can get 75% of the entries in final form. That's an acceptable trade-off for my company.
My point, as others have made, is that there is no magic number. If you think your close process is too long, work backwards. What's the last piece that allows you to say "done"? What makes that the last piece of the puzzle? Is that piece burdened by a desire for 100% perfection when 95% perfect + 5% best estimate might be good enough, particularly if that 5% adds significant time to the process. Attack the biggest rocks at the end of the process first -- and determine whether they are truly rocks. That's where you'll find out how long YOUR close "should" take.
Make company specific closing task lists-checklists with working days to complete after month end and who is assigned to complete the task. For each item indicate if it is a task, regular journal entry or reversing JE. For each item leave a spot for writing in the journal entry number or whatever to indicate the task is completed. Put each of the tasks in order of their needed completion. Process map each separate company's closing task list to determine what bottlenecks exist and tackle them to eliminate them or lessen their impact. Realize that some may not be able to be re-engineered because of the lack of resolve in the executive suite to make it a priority. Obviously, the key endorser of re-engineering the close process must be the executive suite.
I would like to offer links to a few Proformative
The 7 Keys to Unlocking Accounting Close and Reporting Effectiveness (https://www.proformative.com/events/7-keys-unlocking-accounting-close-reporting-effectiveness)
Our close takes about 60 days - we once got it down to 45 days - and 100% of the 'credit' goes to the
Replacing her is not an option. It has been very unpleasant. Ernie, I will look at your webinar links. Thanks.
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Sounds like a job search is in order....
Run to another job while you can.
We dramatically reduced our close time by applying the principals of Scrum. This allowed the team to work concurrently with oversight. The team actually liked it. We are down to 6 business days. It worked so well for us we digitized our method and talk about it at https://blog.businessday.io/businessday-io-for-accounting-teams/. Let me know if you have questions I would be more than happy to share insights on how it worked.
Cheers,
Bryan