Monthly Reporting: How Quick Should it Be?
If you do not have a solid monthly reporting close process, you make your work less impactful.
I have worked with companies both large (billions) and small (million). Regardless of the organization’s size, the path to a quicker and more insightful close is the same. Small and medium-sized business owners often don’t know much about accounting and cannot challenge their well-intentioned accountants. If your close is longer than 5-7 days, there are problems in your close process. That’s regardless of the size of your organization.
If you do not have a solid monthly reporting close process, you make your work less impactful. That’s true even if you have addressed the proper revenue coding issues, have good data integrations, have designed a good chart of accounts & business units, and have automated key reporting.
Monthly Reporting Benchmarks & Focus Areas
It surprises me how often businesses in 2021 still don’t complete their monthly financial reporting quickly. Top performing companies are closing their books in 4-5 days and produce management reports in 7. Median performers 6-7 and 12 days, respectively. What good are financial results if you get them 15-20 days (about three weeks) later?
The following are some areas that might be impeding your staff:
- No monthly timeline: Without a committed close timeline, your staff will inevitably never hit a target deadline. Hold your team accountable for adhering to it.
- Materiality: Don’t let perfection be the enemy of good or even great. Are the staff focused on things that are not material? While “technically” correct, do you need to record a prepaid insurance expense for your companies ten vehicles if that isn’t material to the business?
- Multi-Location & Multi-Company: If your organization has multiple locations or multiple companies and the processes and systems aren’t aligned correctly, the longer things might take. However, good processes and proper design can help overcome system limitations.
- Business & Travel Credit Cards: If your firm is still using paper expense reports or doesn’t have an expense management software that integrates with credit cards, this is a time drain on your staff. There are excellent systems like Bill.com, Abacus, Expensify, and even AMEX that can make everyone’s life much easier. And those that use cards the most will love you for the change. AP automation has one of the highest ROIs for system implementations.
- When does the close start? If the close process starts on the 1st of the month, your staff is already behind. Spread the workload out. Part of the key to a quicker close is knowing what needs to be done and when. In fact, you can do specific entries related to, say, fixed-rate debt or an amortizing prepaid expense for the entire year at once.
5 Questions to Assess Your Monthly Reporting Process
Here are five questions you can ask your finance staff:
- Are you using Excel to produce financial reports or other analyses?
- Do you wait to reconcile cash before releasing financial statements?
- Does your team have and adhere to a close timeline each month?
- Do you capitalize and depreciate all fixed assets for the current period?
- Does your accounting staff work late regularly?
If the answer is “yes” to three or more of these questions, you likely have opportunities to improve your processes significantly. If this is happening with these “basics,” then the more complicated items are more than likely also going to be even more problematic.
Finally, it may be that your organization needs a fresh look from an outside perspective or a regular oversight of a Fractional CFO. Experts can help improve processes and help staff be successful. Be willing to invest in some system integration if it’s necessary.
Do not settle for anything short of 5-7 days.
This is the fifth installment in our CFO Series. Check out all the posts in the series here.
Jim Thurston is the VP of Financial Process Management at BrainSell. He has 20 years of finance and accounting experience (CPA) and 14 years of real estate experience with two of the best-in-class, industry-leading S&P 500 companies in the United States.View Posts
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