Table of contents
1. Introduction
Did you know that Amazon closes its books after just one working day? Fast Close refers to this acceleration of the monthly or annual financial statements. This can be created within a few days after the end of the period without affecting the quality of the data. How can it be that such a huge and listed company is able to do this? How does Amazon manage to deliver accurate and high-quality financial data so quickly?
In this blog post, we want to take a look at what medium-sized companies have to offer from the big ones in terms of Closing speed and why it makes sense to take an example from this.
2. Do you have your monthly close on the 10th working day?
It doesn't necessarily have to be the 1st of a month. But no later than 10 working days every business leader should have his or her financial figures on the table or screen. And not just preliminary figures without closing entries, such as changes in inventories and provisions. The financial statements should also have the quality of an annual financial statement in the monthly or quarterly financial statements. This is the only way you have the opportunity to really use the numbers for control and communication. So it is worthwhile to have a Accelerated closing process Think.
3. What are the benefits of a fast close?
Why is Amazon so eager to deliver figures as quickly as possible and what does that do for me as a medium-sized company? The advantages are manifold:
- the sooner I have fixed the numbers, the sooner I can Decisions Deduce from this
- Transparency creates trust. Amazon hereby indicates to the capital market that the Processes efficient and that you are able to inform about this very quickly
- In the case of listed companies, attention is always focused on the first major player in the sector to publish its financial data. This leads to a PR effect .
Even if you're not a publicly traded company, your stakeholders will appreciate the speedy preparation of financial statements. They signal Shareholders , Employees, auditors and banks that you have your processes under control and are able to answer questions about the financial situation of the company at any time. This not only creates trust, but also helps with strategic decisions, investor searches, credit negotiations (bank rating) or the application for funding opportunities. All competitive advantages should not be underestimated.
We are happy to find out what a cooperation can look like and how we can do it for you in a free and non-binding introductory meeting.
Duration: 30 min.
4. What do I need for a Fast Close? The 10-step plan!
"I'm not a large corporation" is none good excuse. After all, every solid company should also have a functioning finance department have.
Here we explain the 10 steps , which is needed to prepare a fast, high-quality (monthly, quarterly, or annual) financial statement.
Step 1: An organizationally well-positioned finance!
It's no use if my finance and accounting department is "on the last hole" in terms of personnel, then even a fast close project will probably not necessarily be successful.
Therefore, first of all, check whether you have a chronic understaffing of the internal department. Signs of this are, for example, that tasks "pile up" for individual employees and that important processes are left unfinished in the event of illness.
In addition, you should ask yourself whether your employees sufficiently well educated Were. Especially in fast-growing companies, it is not uncommon for technical overloads to occur, which can be counteracted by training and further training the department. Training courses or workshops on fast-close as such can also help here.
Step 2: Do a bottleneck analysis!
More people, more success? Unfortunately, it is not quite that easy and usually not ad hoc to shut. Skilled workers are hard to find and often have to be trained yourself. Therefore, especially if you have noticed an understaffing of the finance department under 1., it is important to make a virtue out of necessity.
What are the bottlenecks that lead to this situation today? In addition to chronic understaffing of the department, this can also be excessive demands or inappropriate prioritization of tasks.
Step 3: Evaluate the bottlenecks identified!
To create a quick month-end close worthy of the name, different departments often need to be multidisciplinary cooperate . This starts with invoicing, through the release of incoming invoices, to informing Finance about matters relevant to provisions. Assess the relevance of the bottlenecks identified:
Here are just a few example questions:
- How long do I wait for the final approval of incoming and outgoing invoices?
- When will I receive the data from HR on vacation and bonus provisions?
- Do we have pending goods or deliveries?
- Were there any relevant complaints?
- Do the intercompany accounts open?
- What other special circumstances are relevant for the financial statements?
In general, you can ask:
- Are all relevant interfaces between finance and other departments of the company working?
- Is it ensured that substitutions work in the event of illness and vacation?
Step 4: Automate manual processes!
"We've always done it this way" is the alarm signal for every consultant. Processes must be alive and adapt to changes in the company. In addition, digitalization makes it easier than ever to find software for automated processes for various use cases that saves time and money and minimizes the risk of errors. ERP Systems are just one example, the use of Robotc Process Automation (RPA) or artificial intelligence (AI) two others.
Step 5: Only relevant information must slow down the closing!
Again and again, we experience in projects that the financial statements are not finalized because Travel expenses and credit card statements have not been released or supporting documents are missing. But is that even relevant?
Most of the time, these are low four- or five-digit amounts that do not affect the message of the financial statements. On the contrary, with a simple provision for outstanding invoices, "the drop would be sucked". Therefore, work with the concept of Materiality. Facts that do not influence the financial statements, i.e. are not material to its accuracy and statement, can be treated differently. This leads us to the next step.
Step 6: Work with boundaries!
Amazon is also so fast because it has a High reliability in estimated values from the past. For example, the company knows the returns from deliveries across all defined product groups. These are so valid that a flat-rate value as risk provisions reduces revenue. This means that the company does not have to wait 30 or more days.
You also have this experience. For example, you know the monthly average fuel costs of your company fleet or telephone costs, even if the bill is still outstanding. So don't wait for these invoices, just book one Provision for outstanding invoices.
It gets a little more difficult when it comes to population changes. If these are relevant to your business model, then this process must work! Therefore, use the functionalities of your ERP system and take care of the processes that are necessary for a correct determination.
Step 7: Work on the relevant processes for an optimal schedule!
If there are relevant and essential connections between Finance and other departments or subsidiaries, then these must be Interfaces work. Optimization is the magic word.
An essential question here is: "Who has to deliver what by when?"
Draw the individual process steps on a timeline. Every department needs its own Clear deadline to provide the required information. Plan appropriate time for coordination and queries. Optimally, you have one day to do this before you create the final report. Create the schedule for:
- Monthly-
- Quarterly and
- Annual accounts
For external reporting, the requirements are stricter and must be taken into account. For example, it could be that expert opinions for pension provisions, soil remediation or calculations for employee participation have to be requested from external experts for the annual financial statements. These dates must also be taken into account in the schedule and coordinated with the external parties, as well as the final tax calculation with the tax advisor or the audit by the annual auditor, which may already take place in parallel.
Step 8: Stress your schedule!
In many cases, schedules are just plans that are all too often torn apart by reality.
But that doesn't mean you can do without it. On the contrary: look where your schedule has weak points.
- Which key people cannot be replaced because they are the only ones who can provide information?
- How can rules of representation be created for these people?
- Are there other ways to get the information, e.g. through automated reports?
These are the questions that will help you to set up the overall process better and more resiliently.
Step 9: Equalize your schedule!
If the schedule is set and you know the weak points, ask yourself whether you can equalize the final theses.
Fixed assets are mentioned as an example. Why not book the asset additions and disposals on the 15th of a month during the year? At the end of the month, they only look at the remaining additions to investments according to materiality aspects ( see step 5 ): Are there any other investments that still have to be booked, otherwise the financial statement would have a significantly different message? If not, make the bookings in the new month when it calms down again ( Step 1 provided). In many cases, you can also calculate provisions or value adjustments on an earlier reporting date and adjust them accordingly to the month-end closing date based on valid empirical values.
Step 10: Just get started!
The best plan is useless if you don't implement it. Especially when the financial accounting situation is tense, it makes sense to devote oneself to the topic. You should start with the biggest "time killers" and then slowly feel your way forward.
5. Conclusion
The timely annual financial statements are not rocket science! With the steps described above, you have the opportunity to constantly improve your closing process and thus become faster without losing closing quality. Critical situations in accounting are good occasions to put the topic of fast close on the agenda.
