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  • Christine Doxey
    Addressing the Layers of Chaos: 10 Best Practices to Simply...5.0
    Topic posted December 5, 2019 by Christine DoxeyRed Ribbon: 250+ Points, tagged Error, Financial Reporting Compliance, Financial Transactions, Financials, Fraud, Governance, Risk Management, Tip in Human Capital Management > Risk Management public
    Title:
    Addressing the Layers of Chaos: 10 Best Practices to Simply Your Financial Close
    Summary:
    As many companies get ready for a December Fiscal Year-End Close, they should consider the best practices recommended in this article.
    Content:

    Introduction

    Over the last decade, the financial reporting landscape has seen significant change. Finance and accounting executives face mounting pressure to increase the accuracy of financial reporting while decreasing the turnaround time needed to close the books. Regulatory agencies have introduced a host of new standards and accounting rules changing materiality  thresholds, requiring detailed schedules, and new disclosures for public filings. To complicate matters, many organizations are being asked to do more with less as headcount numbers are reduced in response to economic pressures. This complexity adds layers of chaos impact the end-to-end process and adversely impacts the time it takes to deliver the final financial statements.  

    There are two overlapping strategies that can help to remove the complexity of your closing process and are applicable to all types of companies and industries.

    1. Implement Best Practices: Consider using recommended best practices to remove the complexity from the closing processes. Implementing best practices can address current process challenges and facilitate a good foundation for financial close automation.
    2. Financial Close Automation:  Automated solutions can significantly simply your financial close process. As an example, you can automate your closing checklist and assign tasks and approvals through workflow which drives a streamlined reporting process.

    10 Best Practices to Simplify Your Financial Close

    The following 10 best practices can help simplify your financial close, provide timely and accurate results, and reduce the cost of the process. Each best practice is grouped by the strategies noted above.  

    10 Best Practices to Simply Your Financial Close

    Supporting Strategy

    1. Document  Your Closing Process and Cross-Train Your Accounting Staff

    Involve the whole organization in understanding the goals and schedule for the close by using well-communicated checklists and project plans. Ensure that roles and responsibilities are documented and well-communicated to all the stakeholders involved in the closing process. Use the documentation to cross-train staff members.

    Implement Best Practices

    1. Develop Partnerships across Departments to Resolve Recurring Cross-Functional Issues and Obstacles to Close

    Following each close, an “Obstacles to Close” or “Post Mortem” report is distributed across the organization. This process provides visibility of cross-functional issues and identifies areas for process improvement.  By constantly looking at ways to improve the financial close, the process can become less cumbersome and easier to manage. 

    Implement Best Practices

    1. Review Unused Accounts in the General Ledger and Minimize Accounting Data

    Minimize accounting data in the core general ledger by limiting code segments to sub-ledgers. This is a somewhat overlooked opportunity to improve the close process, since keeping the general ledger relatively simple accelerates data roll-ups, as well as pushes problem resolution to the business functions that are closest to specific transactions.

    Implement Best Practices

    1. Complete Standard Allocations, Adjusting Entries, Accruals and Estimates in Advance of Close

    Use a standard allocation system with a defined tolerance or true up when something is out of the established tolerance. Create the adjusting entries to recognize prepaid expenses, accrue outstanding invoices, relieve accruals that have been paid, and recognize depreciation and other amortizations.

    Financial Close Automation

    1. Minimize  and Automate Journal Entries During the Closing Process

    Reduce a manual journal entry process. If some journal entries need to be created manually use an upload process with built in checks and balances.  Consider the use of recurring entries and estimates  that can streamline the closing process.

    Financial Close Automation

    1. The Reporting Process: Use Trial Balance Reports as the Foundation for the Close and the Preparation of Accurate Financial Statements

    Use a system generated adjusted trial balance report to review the final balances in the ledger. Verify that the balances are accurate, checking the account activity if needed. Use standard templates for recurring reports. Report writers can streamline and make reports consistent and substantially reduce data entry and the need for reconciliations. 

    Financial Close Automation

    1. Establish a Closing Date as a Critical System Control

    Establish a closing date by which all transactions must be posted. Communicate the closing date to everyone who has access to modify the ledger. A closing date can be implemented as a critical system control and supports the management of your fiscal period close process and the integrity of closed fiscal periods.

    Implement Best Practices  and Financial Close Automation

    1. Manage the Financial Close like a Project

    Implement a schedule for posting closing entries with duties assigned to specific individuals. Ensure that everyone knows the deadlines and what is needed to meet the deadline.

    Implement Best Practices  and Financial Close Automation

    1. Move to a Monthly Soft Close Process

    Transition from a monthly hard close to soft monthly closes and quarterly hard closes. This change allows companies to reduce investigation levels and rely on accruals and estimates during soft closes.  A soft close is best facilitated with automated reconciliation processes and reporting.

    Implement Best Practices  and Financial Close Automation

    1. Develop and Monitor Performance Metrics

    Gathering metrics and publishing the results can help to detect and prevent fraud, identify process improvements and support automation opportunities.  

    Implement Best Practices  and Financial Close Automation

    Conclusion

    The financial close process is one of the most fundamental indicators of the efficiency of your fiscal infrastructure, and is the critical foundation that must be in place before your finance and accounting team can even begin to optimize its role as a true consultative business partner and trusted advisor, assisting in achieving strategic goals and creating shareholder value. Addressing the layers of chaos with our recommended best practices is a key step in the journey to becoming a trusted business partner. Automating the close provides the tools to drive results and support the value of the finance and accounting function.

    If you'd like to improve your financial close, please contact me at chris@chrisdoxey.com.

     

  • Barry Greenhut
    Risk Management at OpenWorld 20175.0
    Topic posted September 19, 2017 by Barry GreenhutSilver Medal: 2,000+ Points, tagged Advanced Controls, Compliance, ERP, Error, Financial Reporting Compliance, Financial Transactions, Financials, Fraud, Governance, GRC, Public Sector, Risk Management, Sarbanes Oxley, Security, Separation of Duties, SOX, Tip, Waste in Human Capital Management > Risk Management public
    Title:
    Risk Management at OpenWorld 2017
    Summary:
    October 1-5, 2017
    Content:

    We hope you'll join us in San Francisco to:


    About Risk Management: Oracle's Risk Management cloud services accelerate deployment and optimization of ERP Cloud processes, and increase compliance with regulatory frameworks like SOX (Sarbanes Oxley):

    • Advanced Financial Controls provides real-time insight into what ERP Cloud users are doing, including fraudulent and wasteful activities
    • Advanced Access Controls shows what ERP Cloud users could do, including violations of SoD (separation of duties) and sensitive access policies
    • Financial Reporting Compliance is used by organizations of all sizes to describe, assess and document their operational and financial risks and controls

    To learn more, tune into our upcoming webcast.