The second part of the process—analysis, drafting, review, and disclosure—also takes time. Hoping to shield themselves from the danger of submitting flawed numbers, boards and CEOs have added additional layers to the task. For example, Alliant Techsystems Inc., a defense contractor in Edina, Minnesota, now has disclosure and compliance committees, a subcertification procedure for business-unit heads, and an audit committee deeply involved in reviewing filings.
Squeezing time savings from the external auditors will not be easy. While the executives interviewed stressed the need to work closely with the accountants, there appears to be little they can do to speed their review. “At the end of the day, there is still a bottleneck with the auditors,” says one executive.
Such obstacles can be daunting. Before anything, says Lawrence Serven, principal at The Buttonwood Group LLP, companies need to recognize that meeting accelerated filing deadlines is a project, and that a haphazard approach will ensure failure. He recommends developing a project charter that outlines the project’s objectives, its scope, a work plan, and a description of its structure in order to escape that fate.
Such basic project-planning skills are essential, says Zebra’s Naughton. When the rules came out, “the first thing we did was put together a project plan outlining how we were going to do it, a time line of events, and steps for speeding up the review process,” he says. One addition was an early review of any nonfinancial parts of the financial statement, such as the descriptions of the company’s products, in the 10-K.
The first area to address in such projects is the close process. According to Serven, companies can easily save time there by redesigning tasks. One headache for many finance departments is rework time, the time spent verifying numbers submitted by business units. Companies that close their books rapidly often minimize this work by requiring employees in the field to scrub their numbers before submitting them to headquarters. Erik Linn, CEO of CapAdvisory, recommends that companies also consider performing daily reconciliations rather than waiting until the end of the month.
Technology applied to a streamlined process can help. For instance, the exception-reporting features available with many finance-software packages can speed the reconciliation process by showing a manager which accounts to focus on. Boston Properties, a real-estate investment trust that has met the shortened 10-K deadline, uses an internally developed, Web-based system to speed the review of variance in each of its 140 properties. “The system makes viewing actual results versus projections very easy,” says Michael Walsh, vice president of finance.
And by using consolidation software—which pulls information from various systems into a single database—companies can escape the tedious, error-prone manual rekeying of data. Zebra’s financial system (the company uses Hyperion Financial Management) has eliminated all spreadsheets, gives greater data consistency, and allows the controller to issue the financials within 7 days. “So we’ll have 28 days from the day we issue internal financial statements to do all our writing and reviewing of the 10-Q,” says Naughton.