So how long does it take everyone to close? I can share that we close comfortably within 2 days for non-quarter month ends. For quarter month ends, we often drift to three days for final adjustments.
Number of Days to Close
Answers
For my entity we use 3 days, but would be able to do it in 2 days if we were not dependent on corporate to run some batches in our system and their slow handling of intercompany.
We used two days to close the books in a $4 Billion property casualty insurance co.
Two to three days is my experience.
I am very interested in
2
your situation is very similar to ours; "closing month end" on our primary systems then begins the arduous process of identifying sales (from several systems due to size and diverse product lines) and determining compensation related to these sales. Our goal is to have internal financials complete by the 10th day of the new month (meaning 6-8 working days); best case scenario given the dependencies/constraints might be 4 working days.
Dawn-We keep our processes simple and make sure everyone gets everything into our systems prior to month end. For more complex issues that involve estimates (workers comp/healthcare/other accruals(some quarterly issues), we review these accounts a few days before month and end and do a quick "re-check" the morning of Day 1. We also have a number of commission and rebate accruals. We separate these by the respective type or sale channel. We make an accrual based on the average historical percentage. We have not had any material differences, and this is audited by our external auditors. One of the keys for us is to enforce the discipline to get things done before the month ends. I was once in an organization where the close didn't begin until Day 1, which just created issues for me in an FP&A role, as close dragged on for two weeks.
Hi Patrick,
Before answering the question, we need to clearly define what the definition of close process is. Generally close process is the period measured from "your first significant pre-close activity to the Date when the last journal entry is booked."
What I see above everyone is answering is only about the "finish line" for the completion of the activities, but does not answer the question "How long does it take to close the books?" as it excludes the pre-month end activities related to the close.
In addition, we need to clearly define if the reconciliations of the GL, Bank accounts are a part of the close process? Yes/No?
If while doing your reconciliations you come across material adjustment, do you wait to put this adjustment in the same month or do you wait till the next month? If you were to record this adjustment in the current month, it is not really a "true close".
In my business experience, I have typically seen companies close processes of 14+ days to around 5 days. The timing will also vary based on factors such as complexity of
I recommend readers of this post might be interested to attend a free
Hi Dawn,
If you have 4 divisions then there might also be some consolidation involved especially if they are trading internally. The 3 days we use is only for our local entity with one business activity. We are 3 persons working on it but we could probably achieve the same result with two.
If I need to consider our business unit headquarter then the close is extended to 7 working days and if looking at the whole Group we are part of we are using a ridiculous amount of time on close. Therefore it is very important to follow-up on the point that Sunil makes. We need to clearly define what we mean by close.
We are more cost driven, but the costs flow through the purchasing system to the
In my experience is usually a -2wd to a +3wd for a local operation. Then if you have to consolidate the entities, then it might take another +4wd on avg. However, note that the close needs to be unique to your organization. I suggest you breakdown the process on each area then ask if the hold up is a people issue, process issue or IT (systems) issue or usually a combination of all three. Once you break down the problem, then you would be able to get a sense of what would be realistic for your company in terms of how long the close would take and what you want to tackle first.
You may reach out to me if you like and I'll be glad to provide some suggestions.
In the webinar that I had mentioned above, had an interesting slide, wherein the close process was divided in three different components:
1. Systems, i.e. ERP and other automated systems such as payroll.
2. Other processes that are outside these systems, i.e. calculation of EPS, Fair values, impairment calculations, etc.
3. People issues.
So if you are looking at all the close activities, you need to see in which of the above three buckets the activity falls under. In my business experience, usually the companies have their ERP systems working OK. However, you need to closely monitor the "other processes" and "people issues". If you focus on only these activities, you can find a lot of areas for improvements. For example, to address the people issues, cross-training always is very helpful as other team members can pitch in just in case of need.
Another important point I will like to make here is that - please do not attempt to make too many changes all at once. Small baby steps in process improvements go a long way. Let me explain, even if you were to make 1-2% process improvements each month, you can achieve 12-25% overall process improvement on a compounded basis in Year 1 and around 20-40% improvement in about two years.
So just look for small improvements!!
Please feel free to contact me and I can provide you with a more specific direction that will be more well suited for your businesses.
Please also see the following link - Free Benchmarks for financial close and disclosure by Company Size, Public vs. Private Company, and Industry. Thanks to Ernie for sharing this information.
https://www.proformative.com/resources/financial-close-benchmarking-data
Have you compare this survey to Robert Half's 2012 Benchmark survey? it shows a few differnt numbers.
Filed Under:
Accounting