Note: This originally appeared on the Sage Intacct blog on December 6, 2017.
User conferences. In my opinion, they are one of the best ways to put day to day tasks temporarily on hold, reboot, and soak up all the practical (and forward thinking) insight that resident product experts, fellow customers and complementary solution providers have to offer. And the recent Sage Intacct Advantage user event was one of the best at delivering all of the above, in spades.
The FloQast team went to Advantage prepped to deliver constructive insight and actionable suggestions regarding our core competency: how to help you close monthly, quarterly and annually in a way that is faster, more accurate and equally critical, audit ready. As accountants ourselves, we’ve been able to parse out the components that comprise a better close approach, one that blends team skills and software technology, and incorporates both strategic planning and tactical implementation.
At Sage Intacct Advantage a few weeks ago, I presented a session dedicated to these best practices, which covered a spectrum of interrelated close and audit topics; I’d like to share them with you here. The goal is to provide you and your organization with some new ways to view, and hopefully enhance, your existing methodology.
So where do we start? Let’s first divvy up the areas for close and audit best practice consideration, and then explore each one in a little more detail, using some often-asked questions. At FloQast, we believe the close collectively consists of four key components: (1) People, (2) Process, (3) Documents and (4) Reconciliations.
Here’s where the mix of your team’s skills and competencies needs to be on point, calibrated to your particular organizational needs. This will evolve as your requirements shift and grow, but some general guidelines can avoid turmoil and inefficiencies.
- Big 4 or non-Big 4 skills? The “right” person for an accounting role may functionally trump the “best” person you might find. Unmet expectations by team members for advancement and the level of their daily responsibilities can lead to dissatisfaction and staff churn.
- CPAs vs non-CPAs? Likewise, given your mix of tasks and assignments, not every role requires a CPA, and in fact, the greater good can be satisfied with a mix of accountants, bookkeepers and financial staff applied appropriately across necessary duties.
- And training? Ensure you encourage CPE classes, approve attendance at user conferences (such as Advantage) and that you cross train individuals internally for both broader proficiency and improved staff back up.
A robust and comprehensive close checklist is critical to ensure that workflows and standardized close processes are in place and prepped for audit. This helps to keep your close on track in a repeatable way, month over month and at year end, while encouraging collaboration and transparency.
- What if a master checklist doesn’t exist? Divide and conquer or consolidate, as most organizations and team members will have created individual task lists, which can be combined and refined to create a broader-based close document. Also, here’s a best practice close checklist that is available for free.
- What should I consider procedurally? First, group tasks by account, such as cash. Then identify and track each by assigning a simple but unique ID. Consider a T plus or minus system for simpler roll forward or back of the actual close date, and to reduce manual checklist upkeep.
- Anything else? Don’t forget to articulate deferred soft close items for flagging in quarterly or annual updates. Make sure roll forward and soft/hard close items are properly documented.
With the advent of digital documents, the organization of the electronic folder structure used to facilitate their straightforward storage and access has taken on multiple schemas. However, the most popular and generally adopted best practice are those structures employing a monthly categorization.
- Why is monthly categorization most effective? Here the document hierarchy flow provides a logical and intuitive top down approach starting with business unit, then drilling down by year, month and account.
- How are docs categorized? Documents in the sub-account structure include policy and procedure documents (usually .doc files), supporting records such as bank statements, invoices and contracts (often .pdf files) and reconciliation files (classically .xls workbooks).
- What are the benefits of a monthly categorization? This approach enables everyone on staff to view the monthly close holistically, accelerate the review process, deliver centralized and logical access to related documents, all while reducing the time spent on PBC requests.
Trial balance tie outs are the final step in closing the books, to prepare you for necessary financial reporting and ensure you are audit compliant. Accomplishing this simplifies audit activities and accelerates their completion.
- What drives the need to standardize this process? Foremost is alignment across your entire team, to validate that everyone is working collaboratively and transparently to close the books.
- What other aspects do I need to consider? Departmental flexibility, including cross balance sheet training, will streamline review processes, engender a consistent workbook review process and reduce errors in tying reconciliations back to trial balances.
- Is Excel still a factor in my close equation? While some debate has surrounded the use of Excel in ongoing close activities, it’s ubiquity and familiarity in the financial community make it the de facto standard for communication between finance, tax and audit pros.
Hopefully what we presented at Sage Intacct Advantage, and encapsulated here, will assist you to improve your close management process and make you good to go for any audit. Take a look at our recent guide The Definitive Guide to Effective Close Management. It’s a valuable read that tackles in-depth the things you need to consider regarding best practices in implementing effective close management while ensuring audit readiness.