Fast Close Metrics

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The simplest approach to measuring the closing process is simply determining the number of days and hours it takes to release financial statements. However, once the closing interval declines to just a few days or even hours, it is useful to measure the closing performance in more detail, with an eye to finding areas in which there are still opportunities for improvement. Here are some possible fast close metrics to consider:

The ratio of adjusting entries to total journal entries during the closing period. Ideally, if an accounting system has been set up to generate minimal transaction errors, there should be very few adjusting entries needed. Thus, a high proportion of adjusting entries is a clear indicator of issues with transaction errors.
Number of errors found during financial statement review. A variation on the last measurement is to add up the number of errors found during a general review of the preliminary financial statements.
Number of inter-company transactions to reverse. If there are many inter-company transactions to be eliminated as part of the close, consider adding them up to gain a general understanding of the impact of this activity on the close.
Break down time requirements by closing activity. A common approach is to break down the closing process into discrete pieces and measure the duration of each one, which can be used to target improvement activities in the longest areas. Some sub-sets of the closing process worth measuring are:
- Time to obtain division results by division
- Time to complete payroll close
- Time to complete invoicing close
- Time to complete payables close
- Time to complete inventory close
- Time to complete cash processing close
- Time to complete management reports

Podcast

There are multiple discussions about the fast close in Episodes 16 through 25 of the Accounting Best Practices podcast.