"When closing the books and optimizing for speed, are there tradeoffs you make or steps you take for month-end that you change for quarter and year end? "
This question was asked at a recent webinar, now available on-demand: "7 Keys to a Fast Close - Save Resources and Time for Improving Results"
Please add your thoughts about it below. Thanks!
I like to close each month as if it were year-end. This makes my year-end a non-event (except for providing pretty schedules to the auditors electronically). The only items I focus on quarterly as opposed to monthly are the ST-LT debt amounts. At prior companies we only looked at these annually to reflect accurately on our annual reports. My current
If I were to manage things on a quarter-end basis only, I think I would find significant problems with memory as I was researching issues. It makes more sense to review on a current basis when you have a better chance of catching something and correcting it before it becomes a major issue.
By making this a monthly process, my close is not extended and the company benefits from timely and accurate information for better strategic decision making.
I agree with Sara. The closer you can replicate a complete close with the month end close, the better off you are at quarter and year ends. You can set yourself up for some nasty reconciliations if you wait to the end of the year, particularly with intercompany and interfund transactions.
However, there may be entries that involve estimates where looking at these quarterly and annually will be satisfactory. For example, there may be reserves there are not material. The work done reviewing the reserve in January, for example, may not help much with the year end review in December, so you aren't gaining much in anything from doing a more frequent review.
But where there are transactions involved month by month, there's value to taking care of these month by month, so at year end, you only have the final month activity to go through.
Jon makes a good point that not every trial balance account need the same frequency. Our customers run their month-end-close in the cloud and besides frequency also treat accounts different depending on defined
What we see is that a fast close is possible on a monthly basis if you have tight processes and good tools but no tool can help you if the quality in the process is weak.
From my experience at various companies, each of the cutoff periods has similar standards. Quarterly is slightly more diligent particularly in terms of reserve adjustments and year end has the audit review. Interestingly, I was with a company that went to monthly "soft close" and quarterly "hard close." I liked the concept as it forced the business to find ways to measure performance without depending on the general ledger to run the business. Unfortunately, this was put in place about nine months before the Enron and MCI debacles and the whole financial world changed.
My company has soft closes in interim months for accounts that are unlikely to motivate decision making. We don't look at reserves, we don't reconcile
These answers might change depending on the company, but I haven't seen a single decision be made at my company based on reserves movements, so why spend the time and resources polishing it anymore than is necessary?
As a general rule, I agree with Sara. Not every balance sheet account needs a full reconciliation but the significant accounts should be reconciled every month, AP, AR, Inventory, Cash etc. The Trial Balance should be reviewed and any account with a large change in the balance or and amount that does not make sense should be investigated. All normal accruals should be done. When year end rolls around, it should be a non event.
