Fast Close

Praise for Fast Close: A Guide to Closing the Books Quickly "Steve captures the essence of the problems affecting the financial close process within corporations of all sizes; from the period close of subledgers and general ledger through financial reporting, and the relationship and interdependencies of governance, people and technology. A must-read for the corporate controller." —David Taylor, ACMA, MBA, VP Strategy, Trintech Inc. "Fast Close: A Guide to Closing the Books Quickly, Second Edition is a must-read for today's busy controllers. Steven Bragg points out everything that can be done outside the close that you just never realized didn't actually have to be part of the month-end close process! Very commonsensical approach!" —Kathleen Schneibel, mba, cpa, Controller/CFO for Hire, KMAS Consulting LLC "A well-executed 'fast close' can bring many valuable benefits to any company, from improving organizational performance to transforming accounting executives from financial historians to trusted advisors. In Fast Close, Second Edition, Steve systematically breaks down the steps required to achieve a fast close in both public and private companies, providing financial executives with tips, checklists, and a cost-effective road map to implement fast close procedures in virtually any company." —Matthew Posta, Esq., CPA, Vice President of Finance, Key Air, LLC FROM THE FIRST EDITION "This is an outstanding book in which Steve reveals his secrets to a fast close. Having personally experienced his (one-day) fast close for years and enjoyed the beneficial impact on my company, I highly recommend this book for all financial officers who desire to have a large, favorable impact on their company." —Richard V. Souders, President and CEO, Kaba Workforce Solutions

Preface xv Chapter 1 Introduction 1 Different Types of Fast Close 1 Benefits of the Fast Close 2 Legal Issues Impacting the Fast Close 3 Steps to Achieve a Fast Close 4 Summary 6 Chapter 2 Your Current Closing Process 7 Traditional Closing Process: Basic 7 Additional Closing Tasks for the Multidivision Company 11 Additional Closing Tasks for the Multinational Company 12 Additional Closing Tasks for the Public Corporation 12 Problems with the Closing Process 13 Summary 17 Endnote 17 Chapter 3 Conducting a Review of the Closing Process 19 Steps in the Process Review 19 Payables Process Review 22 Billing Process Review 22 Inventory Process Review 24 Cash Process Review 26 Final Closing Process Review 26 Total Duration of the Closing Process 29 Summary 29 Endnote 29 Chapter 4 Alter the Timing of Closing Activities 31 Altering the Closing Mindset 31 Review and Correct Subledger Transactions Throughout the Month 32 Complete the Bank Reconciliation Every Day 32 Review Uncashed Checks 33 Update the Inventory Obsolescence Reserve 33 Determine the Lower of Cost or Market 33 Calculate Overhead Allocation Bases 33 Bill Recurring Invoices 34 Conduct a Preliminary Comparison of the Shipping Log to Invoices Issued 35 Review Preliminary Rebillable Expenses 35 Update the Bad Debt Reserve 35 Review Preliminary Billable Hours 36 Accrue Interest Expense 36 Determine Pension Plan Funding 36 Determine Flexible Spending Account Funding 37 Accrue Unpaid Wages 37 Accrue Unused Vacation Time 38 Accrue Travel Expenses 38 Reconcile Asset and Liability Accounts 39 Calculate Depreciation 39 Compile Preliminary Commissions 40 Review Financial Statements for Errors 40 Complete Selected Financial Reports in Advance 41 Deferred Closing Activities 42 Summary 46 Chapter 5 Revise the Contents of the Financial Statements 47 Alter the Mode of Report Delivery 47 Standardize Reports 48 Eliminate Cost Reporting from the Reporting Package 49 Separate Metrics from the Financial Reporting Package 49 Summary 50 Chapter 6 Optimize the Use of Journal Entries and Chart of Accounts 51 Eliminate Immaterial Journal Entries 51 Standardize Journal Entries 52 Convert to Recurring Journal Entries 53 Centralize Use of Journal Entries 54 Use Journal Entries to Accrue Expenses Delaying the Close 54 Automate Journal Entry Postings 55 Use Accruals Only for External Reporting 55 Define Accounts 55 Standardize the Chart of Accounts 56 Automate Eliminations of Intercompany Transactions 57 Summary 57 Chapter 7 Standardization and Centralization 61 Impact of Standardization on the Closing Process 61 Impact of Centralization on a Multilocation Accounting Department 63 Impact of Centralization on a Single-Location Accounting Department 65 Incorporating Standardization and Centralization into Acquisition Activities 66 Summary 68 Chapter 8 Closing the Inventory Function 69 Create an Inventory Tracking System 69 Implement Cycle Counting 73 Reduce the Amount of Inventory 77 Properly Record the Lower of Cost or Market Rule 84 Reviewing Obsolete Inventory 85 Preventing Obsolete Inventory 87 Summary 89 Endnotes 91 Chapter 9 Closing the Billing Function 93 Bill Recurring Invoices in the Preceding Month 93 Computerize the Shipping Log 94 Eliminate Rebillable Expense Processing from the Core Closing Period 95 Eliminate Month-End Statements 96 Print Invoices Every Day 96 Transmit Transactions via Electronic Data Interchange 97 Summary 97 Endnote 99 Chapter 10 Closing the Payroll Function 101 Automatically Calculate Commissions in the Computer System 101 Simplify the Commission Structure 102 Install Incentive Compensation Management Software 103 Post Commission Payments on the Company Intranet 103 Avoid Adjusting Preliminary Commission Accrual Calculations 104 Use a Bar-Coded Time Clock 105 Use a Web-Based Timekeeping System 106 Automate Vacation Accruals 107 Merge Sick Time into Vacation Time 108 Cap the Amount of Vacation Time to Be Carried Forward 108 Summary 110 Endnote 110 Chapter 11 Closing the Payables Function 111 Automate the Month-End Cutoff 111 Pay Based on Receiving Approval Only 112 Automate Three-Way Matching 114 Reduce Required Approvals 115 Use Negative Assurance for Invoice Approvals 117 Use Procurement Cards 117 Have Suppliers Include Their Supplier Numbers on Invoices 122 Receive Billings Through Electronic Data Interchange 123 Request That Suppliers Enter Invoices Through a Web Site 124 Audit Expense Reports 125 Automate Expense Reporting 127 Link Corporate Travel Policies to an Automated Expense Reporting System 128 Issue a Standard Account Code List 129 Link Supplier Requests to the Accounts Payable Database 130 Automate Payments for Repetitive Processing 131 Eliminate Manual Checks 132 Use a Signature Stamp 133 Ignore Supplier Invoices and Pay from Statements 134 Issue Standard Adjustment Letters to Suppliers 135 Summary 135 Endnote 135 Chapter 12 Closing the Cash Processing Function 137 Access Bank Account Information on the Internet 137 Avoid Delays in Check Posting 138 Collect Receivables Through Lockboxes 138 Install a Lockbox Truncation System 140 Access Online Check Images from a Lockbox 141 Consolidate Bank Accounts 141 Summary 142 Endnote 142 Chapter 13 Impact of Automation on the Closing Process 143 Principles of Fast Close Automation 143 Implement Minor Programming Changes on an Ongoing Basis 144 Automate General Ledger Interfaces 145 Install a Web-Based Timekeeping System 145 Install a Workflow Management System 147 Install Consolidation Software 148 Install a data Warehouse 148 Install an Enterprise Resources Planning System 149 Summary 151 Chapter 14 Closing the Books of a Public Company 153 Overview 153 Constructing the SEC Filing 153 Quarterly Auditor Reviews and Audits 157 Quarterly Legal Review 160 Officer Certification 160 Audit Committee Approval 161 EDGARizing 162 Summary 162 Chapter 15 Controls for Financial Reporting 165 Overview 165 Controls for Financial Reporting 165 Summary 176 Chapter 16 Ongoing Improvements in the Closing Process 177 Ongoing Improvement Process 177 Improvement Measurements 179 Summary 180 Appendix A Comprehensive Closing Checklist 181 Appendix B Fast Close Policies and Procedures 185 Appendix C Soft Close Checklist 197 Appendix D Year-End Close Checklist 201 Index 205