Page 245 - Accounting Best Practices

c12.qxd 7/31/03 3:18 PM Page 234
Financial Statements Best Practices
234
processes. However, there may be a few cases, such as invoicing very large dollar
amounts or paying suppliers in order to take a large early payment discount,
where it pays to go ahead with the work in the current period, but only for key
items; the remaining smaller items can still be deferred for a short time. This
solution is an easy way to reduce the amount of overtime required to complete
the financial statements.
Cost: Installation time:

12–9 ELIMINATE MULTIPLE APPROVALS

A typical problem when financial statements are produced is to have employees
wait for approvals before they are allowed to complete their tasks, or to pass
along work to other employees, who cannot begin until the approvals are given.
When there are many approvals to obtain, especially in areas where the approvals
are holding up key work products, there can be a substantial impact on the speed
of financial statement completion. Typical spots in the financial statement process
that include approvals are journal entries, footnotes, the final version of the state-
ments, and the final results from all of the major accounting modules: accounts
payable, accounts receivable, payroll, and fixed assets. Given the number of
approvals in some companies, it is a wonder that the financial statements are ever
produced in less than a month.
There are several solutions that bypass the approvals problem. When reviewing
them, one must consider the underlying reason for using approvals, which is to
ensure that information is correctly processed. Without an approval, there must be a
countervailing system in place to ensure that accurate information is still transmitted
to the financial statements. Some solutions to the approvals dilemma are as follows:

• Designate a back-up approver. If there is a continuing problem with finding
the person who is allowed to issue approvals, then there should be a back-up
approver available. This should still be a person who has a sufficient level of
technical expertise, and so this solution is only a viable option for those com-
panies with some extra employees on hand who are sufficiently qualified.
• Increase training levels. An excellent way to avoid approvals is to train the
accounting staff in the closing procedures so that they all become experts in
their jobs. After heavy and repeated training, it is quite common to find that
the staff is more technically proficient in their tasks than their bosses, with
little need for any approval. Also, newcomers to the accounting department
must receive similarly high levels of indoctrination.
• Issue ranges within which approvals are not required. The best way to handle
the approval problem is not to require approvals at all. To do so, determine the
comfort level of the controller in regard to how much an accountant is allowed
to do without any supervisory review. For example, one can establish a limit