Fast Close Toolkit

CHRISTINE H. DOXEY, CAPP, CCSA, CICA, CPC, is president of Doxey, Inc., a consultancy that has brought vast improvements to the finance departments of leading organizations worldwide. Doxey is on the Advisory Boards of The Exchange Summit and The Institute for Internal Controls. Previously, Christine was a financial executive at Hewlett Packard and Verizon Business. She has authored several books and speaks on a range of financial processes and internal controls best practices at global conferences.

• Preface xiiiHow This Toolkit is Organized xivGuide to Toolkit Organization xvTable of Best Practices xviiTable of Policies xviiiTable of Checklists xviiiTable of Process Narratives xviiiTable of Standards of Internal Control xixIntroduction 1Improving the Fiscal Close 3Best Practice 1: Consider the Use of a Single ERP System 4Best Practice 2: Employ Cloud-Based Computing 5Chapter 1: Why the Continued Focus on the Fiscal Closing Process? 7An Overview of the Fiscal Close 9Cycle Time to Monthly Close 10Chapter 2: Key Pain Points and Bottlenecks 13Chapter 3: The Components of the Fiscal Close 15Cutoff Dates 16Best Practice 3: Implement Cutoff Dates 16Chapter 4: Governing the Fiscal Close Process 19Best Practice 4: Implement a Fiscal Close Governance Process 20Composition of GAAP 21GAAP Hierarchy 22Other Disclosure Standards 22Chapter 5: The Transaction Accumulation, Reconciliation, and Sub-Ledger Close 27Best Practice 5: Complete General Ledger Reconciliations 30Accounting Bodies 31Other Regulatory Requirements 31Chapter 6: Introduction to the Standards of Internal Control 33Best Practice 6: Implement an Internal Controls Program 34Ensuring Success 36Chapter 7: Roles and Responsibilities During the Fiscal Close 39Tactical Responsibilities 40Executive Responsibilities 43Chapter 8: The General Ledger and Trial Balance 45Chapter 9: The Common Chart of Accounts 47Best Practice 7: Implement a Common Chart of Accounts 47Sample Chart of Accounts 49Chapter 10: Cost Centers 53Best Practice 8: Define Business Rules for Establishing Cost Centers 54Best Practice 9: Define Allocation Risks 55Common Allocation Challenges 57Best Practice 10: Implement an Indirect Cost Allocation Methodology 59Chapter 11: The Journal Entry Process 63Best Practice 11: Streamline Recurring Journal Entries 64Chapter 12: Spreadsheet Controls 65Best Practice 12: Address Spreadsheet Risks and Implement Controls 65Balancing Risks with Controls 67Chapter 13: Checklists for the Transaction Accumulation, Reconciliation, and Sub-Ledger Close 69Checklist 1: Transaction Accumulation and Fiscal Close Checklist 69Checklist 2: Fiscal Year-End Close Sample Schedule 72Checklist 3: Accounts Payable Roles and Responsibilities Year-End Checklist 73Checklist 4: Reconciliation Template 74Chapter 14: Sample Policies for the Transaction Accumulation, Reconciliation, and Sub-Ledger Close 75Policy 1: Account Reconciliation Policy 75Policy 2: Accounts Payable Accruals 78Policy 3: Spreadsheet Controls 81Controls Standards 83Best Practice Guidelines 84Chapter 15: Process Narratives for the Transaction Accumulation, Reconciliation, and Sub-Ledger Close Process 87Process Narrative 1: Journal Entry (JE) Process 87Process Narrative 2: Management Approval of Journal Entries 88Process Narrative 3: Other Current and Long-Term Assets 89Process Narrative 4: Other Current and Long-Term Liabilities 92Chapter 16: Standards of Internal Control for the Transaction, Accumulation, Reconciliation, and Sub-Ledger Close Process 97Standards of Internal Control 1: Journal Entry (JE) Process 97Standards of Internal Control 2: Management Approval of Journal Entries 99Standards of Internal Control 3: Other Current and Long-Term Assets 101Standards of Internal Control 4: Other Current and Long-Term Liabilities 109Chapter 17: Corporate Close and Consolidation 117Differences Between IFRS and U.S. GAAP That Impact the R2R Process 118How Often are New IFRS Pronouncements Issued? 119Is IFRS, as Issued by the IASB, the Same for All Companies and Industries, in All Countries? 119What is The Principal Standard Governing Conversion to IFRS? 120Does IFRS Use the Same Financial Statements as Those Required under U.S. GAAP? 121How Will IFRS Impact Internal Control Reporting and Certification under the Sarbanes Oxley Act of 2002? 122Chapter 18: The Number of Consolidation Points 123Best Practice 13: Automate the Consolidation Process 124Best Practice 14: Include the People Who Impact the Close 124Best Practice 15: Create Consistent Closing Schedules 124Best Practice 16: Consider Fiscal Close Process Improvements 125Chapter 19: The Number of Closing Cycles 127Best Practice 17: Reduce the Number of Closing Cycles 127Chapter 20: Post-Closing Entries 129Financial Closing Strategies 129Best Practice 18: Develop Business Rules for Post-Closing Entries 130Chapter 21: Communication and Accountability 131Fiscal Close Postmortem Meetings 132Chapter 22: Financial Statement Assertions 133Financial Statement Assertion Requirements and Application 134Chapter 23: Checklists for the Corporate Close and Consolidation Process 137Checklist 5: Corporate Close and Consolidation 137Checklist 6: Executive-Level Closing Checklist 139Checklist 7: Twenty Critical Areas to Review at Year-End 142Checklist 8: The Year-End Financial Statement Checklist 143Checklist 9: The Year-End Transaction Checklist 144Checklist 10: The Year-End Payroll Process Checklist 146Chapter 24: Sample Policies for the Corporate Close and Consolidation Process 149Policy 4: Fiscal Close and Consolidation Process 149The Timely Communication of Delays 152Adjustments Requested by Field and Corporate Personnel 152Adjustments Between Preliminary and Final Results 153“Late” Adjustments 153Chapter 25: Process Narratives for the Corporate Close and Consolidation Process 155Process Narrative 5: Balance Sheet Consolidation 155Process Narrative 6: Assets Held for Sale Due to Discontinued Operations 157Chapter 26: Standards of Internal Control for the Corporate Close and Consolidation Process 161Standards of Internal Control 5: Balance Sheet Consolidation 161Standards of Internal Control 6: Assets Held for Sale Due to Discontinued Operations 164Chapter 27: Analysis and Reporting (The Final Mile) 169Chapter 28: Internal and External Reporting 171Internal Reporting 171Best Practice 19: Ask Key Questions to Define Your Internal Financial Reporting Process 172External Reporting 175Chapter 29: Budgeting and Forecasting 181About the Budget Process 182Types of Budget Processes 182Best Practice 20: Consider Five Steps for a Successful Budget Process 184Ten Considerations for a Successful Budget Process 188Variance Analysis 191Other Factors to Consider 192Corporate Performance Management (CPM) 194A Moving Target 194Chapter 30: Reduce Fiscal Close Cycle Times by Moving Your Finance Function to “Dynamic” Budgeting and Planning 197Dynamic Budgeting and Planning 197Chapter 31: Fixed Assets and the Capital Budget 199Best Practice 21: Establish a Capital Budget Process 199Developing the Capital Budget 200Best Practice 22: Implement the Capital Review and Approval Board (CARB) Process 201Construction in Process Accounting 207Fixed Asset Management 207Depreciation Methods 208Intangible Assets 211Asset Appreciation and Asset Impairment 212Disposal of Fixed Assets 214The Capital Budget and Fixed Assets Business Process Risks and Challenges 217Chapter 32: The Forecast Process 221About the Forecast Process 222Types of Forecasting Models 222The Forecasting Process for Small Businesses 224Chapter 33: The Fiscal Close and Strategic Planning 227Expected Outcomes of the Strategic Plan 227Best Practice 23: Include Finance and Accounting in the Strategic Planning Process 228Best Practice 24: Use a Strategic Planning Readiness Checklist 229Best Practice 25: Follow These Seven Steps for Your Strategic Planning Process 230Best Practice 26: Implement Six Key Elements for Your Strategic Plan 230Best Practice 27: Use a Standardized Table of Contents for Your Strategic Plan 231Strategic Planning Methodologies 232Best Practice 28: Establish Performance Metrics to Determine the Effectiveness of Your Strategic Plan 236Chapter 34: Analytics to Detect Financial Statement Fraud 237Best Practice 29: Use Red Flags to Detect Financial Statement Fraud 238The National Commission on Fraudulent Financial Reporting (The Treadway Commission) 240Use Detection Methods for General Financial Statement Fraud 243Chapter 35: Checklists for the Analysis and Reporting Process 247Checklist 11: Quarter-End Fiscal Close (10Q) 247Checklist 12: Year-End Fiscal Close (10K) 251Checklist 13: Performing Financial Statement Analysis 257Checklist 14: Trend Analysis 264Chapter 36: Sample Policies for the Analysis and Reporting Process 271Policy 5: Basic Policies on Financial Reporting 271Chapter 37: Process Narratives for the Analysis and Reporting Process 273Process Narrative 7: Disclosure Checklist 273Process Narrative 8: Fluctuation Analysis 274Process Narrative 9: Cash Flow Statement Reconciliation 276Process Narrative 10: Reporting Debt 277Chapter 38: Standards of Internal Control for the Analysis and Reporting Process 283Standards of Internal Control 7: Disclosure Checklist 283Standards of Internal Control 8: Fluctuation Analysis 284Standards of Internal Control 9: Cash Flow Statement Reconciliation 287Standards of Internal Control 10: Reporting Debt 290Chapter 39: The Virtual Close: Myth or Reality? 299What is the Virtual Close? 299How is the Virtual Close Different from the Soft Close? 300Case Study: The Virtual Close at Cisco 300Implementing a Virtual Close 303Chapter 40: Roadmap: Benefits of the Fast Close 305Different Types of Fast Fiscal Closing Processes 306Soft Close 306Virtual Close 307Legal Issues Impacting the Fast Financial Close 307Steps to Achieve a Faster Financial Close 307Conclusion 310Chapter 41: Accelerating the Close with Automation 311Key Requirements for Automating the Fiscal Close 311Key Questions to Ask During Implementation 312System Ease of Use 312Quality of Financial Information 313Accounts Payable and Purchasing 314Project Accounting 314Addendum: Fast Close Tools and Additional Best Practices 315Contingency Planning 315Best Practice 30: Establish Escalation Procedures 322Roadmap: 25 Steps to Shorten the Fiscal Close 323The Monthly Financial Close Process Checklist 327Foreign Corrupt Practices Act (FCPA) 336Accelerate Your Financial Close: A 35-Step Roadmap 337The Fast Close Compliance Toolkit 340The M&A Due Diligence Checklist 362Finance and Accounting Key Business Partnerships Matrix 372Fiscal Close Risks and Challenges 374Fiscal Close Standards of Internal Control 376The Fiscal Close Dashboard 379The Controller’s Dashboard 380The Detailed Fiscal Close Scorecard 380The Project Management Toolkit 382Glossary 387Index 403