Page 254 - Accounting Best Practices

c12.qxd 7/31/03 3:18 PM Page 243
12–17 Document the Process
Exhibit 12.4 (Continued) 243
2. Complete all operating data for inclusion in the financial statements.
3. Complete a preliminary set of financial statements.
• Fourth day after period-end
1. Finalize the financial statements and issue.
2. Calculate the borrowing base certificate and send it to the bank, along with a set
of financial statements.

The only issue with creating a closing schedule is that it is a constantly chang-
ing document requiring regular updating and communication to the accounting
staff. The reason for the regular updates is that the schedule will initially allow for a
substantial number of days before statements are completed, but management will
gradually shrink the number of days, requiring a constant reshuffling of tasks and
responsibilities. The accounting staff will only follow changes to the schedule if the
alterations are clearly communicated to them. In particular, the controller must lis-
ten to their objections regarding a reduction in the time to complete tasks so their
requirements can be incorporated into the schedule. As long as these factors are
considered, the closing schedule becomes the foundation document that drives the
timely completion of the financial statements.

Cost: Installation time:

12–17 DOCUMENT THE PROCESS

Some organizations have created closing procedures and established responsibil-
ities for those accounting people who are involved with the production of finan-
cial statements, which helps them to some degree in organizing the flow of work.
However, they meet with great resistance when they take the next step and man-
date reductions in the time needed to complete the statements. Employees grouse
that there is not enough time to complete their work, that upstream work is not
completed on time (which does not allow them to start their tasks on time), and
that management does not know all the details required to complete their tasks.
As a result, though the process appears to be more organized, there is no way to
reduce the time and resources allocated to it.
The underlying reason why this problem arises is that the employees are
right—the managers who are driving for shorter completion dates do not really
know the process and cannot understand the plethora of additional necessary
changes before the process will become truly streamlined. The only way to avoid
this quagmire is to document the process thoroughly. This means that a team must
interview all employees who are involved in the reporting process, write down