However, complex transactions and issues eventually slow down the process, says Steve Kuchen, a member of IMA’s Small Business Committee, former CFO of PacificHealth Laboratories and consultant to small public and private companies. Kuchen deals with XBRL reports, which require several extra days to review as well as allowing for extra time for the statements to be put in XBRL format.
“It can become worrisome” to review the language, adding two to four days to the process. What’s more, XBRL is not going anywhere, making the accounting process more complex. Kuchen recommends starting with a checklist that includes listing all necessary procedures and journal entries that need to be completed to properly close the books and prepare financial statements. A timeline can record when each task is completed and by whom, ensuring the books are closed on time.
CFOs can play a prominent role in the process, leading the charge in understanding how to improve the close, says Zubizarreta. First, executives re-evaluating the process should know how many people are involved in the process, who does what in the cycle, what can be moved to the pre-close cycle, where the bottlenecks are, etc. A CFO, for instance, may want to take some pressure off the close by reviewing recurring items such as fixed-asset depreciation before the month ends, Driscoll says.
Once those are answered, executives can break down the information to help streamline the process and eliminate kinks in the system. They should start by identifying the causes of the holdups in the process, determining if it’s a whole department or one person slowing things down. CFOs can then suggest adjustments to the process to eliminate the financial process congestion.
Because processes are being centralized and standardized to align with technological advances, companies now have one dashboard that can be accessed from most places in the world. Executives can see the status of work anywhere, and can make people accountable for bottlenecks. This pushes people to work harder so their name doesn’t appear in red, Cheney says.
Hastening the process comes down to more than standardization, however. Because corporations have become more complicated in past decades through acquisitions, more complex subsidiary structures and so on, executives need to be aware of local reporting requirements and differing rules to apply for different corporate structures. Indeed, incorporating a larger number of legal entities makes it harder to aggregate the reporting.
Current regulatory buildups abroad parallel the tough — and getting tougher — regulatory environment in the United States. For example, SEC regulations, Financial Accounting Standards Board strictures and Sarbanes-Oxley complicate matters even further with penalties and enforcement beyond the rules governing specific industries.