Is 10 days too long?
With Tom Pryor
Q. I am frustrated by how long it takes to get my monthly accounting reports. Should it take 10 days after a month’s end to receive the prior month’s profit and loss statement? What is best practice?
A. You have a right to be frustrated. While most HME businesses take seven to 10 calendar days to close the books, best practice organizations take only two to three days. Time saved can be used to clean up the balance sheet, analyze product line profitability or develop plans to respond to competitive bidding.
To reduce your monthly closing process time and cost:
- Take time to think. List reasons why you need the monthly reports in less than five days after a month’s end.
- Meet with your accountant. Explain why a faster monthly closing is important. Ask your CFO, controller or accountant to agree to a specific goal, e.g., “Let’s cut the monthly closing process time by 50% in the next three months. OK?”
- Assemble a group of employees who perform activities in the closing process, e.g. accounts payable, billing, I.T., etc. Map the existing closing process activities on a wall.
- Ask employees for ideas to create a faster closing process. To generate ideas, ask thought-provoking questions, e.g., “If we eliminated the word Actual from the P&L statement, would that eliminate steps and time from the closing process?”
- Approve, deny or defer their recommendations.
- Implement changes.
- Measure and celebrate the improvement.
Tom Pryor is president of ICMS, Inc. He can be reached at 817-483-6511 or TomPryor@icms.net.