Fast Close

STEVEN M. BRAGG, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master's degree in finance from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, is an avid alpine skier and mountain biker, and is a certified master diver. Mr. Bragg resides in Centennial, Colorado. He is also the author of Accounting Best Practices and Accounting Policies and Procedures Manual, both published by Wiley.

• Preface xvChapter 1 Introduction 1Different Types of Fast Close 1Benefits of the Fast Close 2Legal Issues Impacting the Fast Close 3Steps to Achieve a Fast Close 4Summary 6Chapter 2 Your Current Closing Process 7Traditional Closing Process: Basic 7Additional Closing Tasks for the Multidivision Company 11Additional Closing Tasks for the Multinational Company 12Additional Closing Tasks for the Public Corporation 12Problems with the Closing Process 13Summary 17Endnote 17Chapter 3 Conducting a Review of the Closing Process 19Steps in the Process Review 19Payables Process Review 22Billing Process Review 22Inventory Process Review 24Cash Process Review 26Final Closing Process Review 26Total Duration of the Closing Process 29Summary 29Endnote 29Chapter 4 Alter the Timing of Closing Activities 31Altering the Closing Mindset 31Review and Correct Subledger Transactions Throughout the Month 32Complete the Bank Reconciliation Every Day 32Review Uncashed Checks 33Update the Inventory Obsolescence Reserve 33Determine the Lower of Cost or Market 33Calculate Overhead Allocation Bases 33Bill Recurring Invoices 34Conduct a Preliminary Comparison of the Shipping Log to Invoices Issued 35Review Preliminary Rebillable Expenses 35Update the Bad Debt Reserve 35Review Preliminary Billable Hours 36Accrue Interest Expense 36Determine Pension Plan Funding 36Determine Flexible Spending Account Funding 37Accrue Unpaid Wages 37Accrue Unused Vacation Time 38Accrue Travel Expenses 38Reconcile Asset and Liability Accounts 39Calculate Depreciation 39Compile Preliminary Commissions 40Review Financial Statements for Errors 40Complete Selected Financial Reports in Advance 41Deferred Closing Activities 42Summary 46Chapter 5 Revise the Contents of the Financial Statements 47Alter the Mode of Report Delivery 47Standardize Reports 48Eliminate Cost Reporting from the Reporting Package 49Separate Metrics from the Financial Reporting Package 49Summary 50Chapter 6 Optimize the Use of Journal Entries and Chart of Accounts 51Eliminate Immaterial Journal Entries 51Standardize Journal Entries 52Convert to Recurring Journal Entries 53Centralize Use of Journal Entries 54Use Journal Entries to Accrue Expenses Delaying the Close 54Automate Journal Entry Postings 55Use Accruals Only for External Reporting 55Define Accounts 55Standardize the Chart of Accounts 56Automate Eliminations of Intercompany Transactions 57Summary 57Chapter 7 Standardization and Centralization 61Impact of Standardization on the Closing Process 61Impact of Centralization on a Multilocation Accounting Department 63Impact of Centralization on a Single-Location Accounting Department 65Incorporating Standardization and Centralization into Acquisition Activities 66Summary 68Chapter 8 Closing the Inventory Function 69Create an Inventory Tracking System 69Implement Cycle Counting 73Reduce the Amount of Inventory 77Properly Record the Lower of Cost or Market Rule 84Reviewing Obsolete Inventory 85Preventing Obsolete Inventory 87Summary 89Endnotes 91Chapter 9 Closing the Billing Function 93Bill Recurring Invoices in the Preceding Month 93Computerize the Shipping Log 94Eliminate Rebillable Expense Processing from the Core Closing Period 95Eliminate Month-End Statements 96Print Invoices Every Day 96Transmit Transactions via Electronic Data Interchange 97Summary 97Endnote 99Chapter 10 Closing the Payroll Function 101Automatically Calculate Commissions in the Computer System 101Simplify the Commission Structure 102Install Incentive Compensation Management Software 103Post Commission Payments on the Company Intranet 103Avoid Adjusting Preliminary Commission Accrual Calculations 104Use a Bar-Coded Time Clock 105Use a Web-Based Timekeeping System 106Automate Vacation Accruals 107Merge Sick Time into Vacation Time 108Cap the Amount of Vacation Time to Be Carried Forward 108Summary 110Endnote 110Chapter 11 Closing the Payables Function 111Automate the Month-End Cutoff 111Pay Based on Receiving Approval Only 112Automate Three-Way Matching 114Reduce Required Approvals 115Use Negative Assurance for Invoice Approvals 117Use Procurement Cards 117Have Suppliers Include Their Supplier Numbers on Invoices 122Receive Billings Through Electronic Data Interchange 123Request That Suppliers Enter Invoices Through a Web Site 124Audit Expense Reports 125Automate Expense Reporting 127Link Corporate Travel Policies to an Automated Expense Reporting System 128Issue a Standard Account Code List 129Link Supplier Requests to the Accounts Payable Database 130Automate Payments for Repetitive Processing 131Eliminate Manual Checks 132Use a Signature Stamp 133Ignore Supplier Invoices and Pay from Statements 134Issue Standard Adjustment Letters to Suppliers 135Summary 135Endnote 135Chapter 12 Closing the Cash Processing Function 137Access Bank Account Information on the Internet 137Avoid Delays in Check Posting 138Collect Receivables Through Lockboxes 138Install a Lockbox Truncation System 140Access Online Check Images from a Lockbox 141Consolidate Bank Accounts 141Summary 142Endnote 142Chapter 13 Impact of Automation on the Closing Process 143Principles of Fast Close Automation 143Implement Minor Programming Changes on an Ongoing Basis 144Automate General Ledger Interfaces 145Install a Web-Based Timekeeping System 145Install a Workflow Management System 147Install Consolidation Software 148Install a data Warehouse 148Install an Enterprise Resources Planning System 149Summary 151Chapter 14 Closing the Books of a Public Company 153Overview 153Constructing the SEC Filing 153Quarterly Auditor Reviews and Audits 157Quarterly Legal Review 160Officer Certification 160Audit Committee Approval 161EDGARizing 162Summary 162Chapter 15 Controls for Financial Reporting 165Overview 165Controls for Financial Reporting 165Summary 176Chapter 16 Ongoing Improvements in the Closing Process 177Ongoing Improvement Process 177Improvement Measurements 179Summary 180Appendix A Comprehensive Closing Checklist 181Appendix B Fast Close Policies and Procedures 185Appendix C Soft Close Checklist 197Appendix D Year-End Close Checklist 201Index 205