Remove metrics from the financial reporting package

The financial statements can be considered just the income statement and balance sheet, but tend to grow over time, eventually encompassing a cover letter, statement of cash flows, statement of retained earnings, departmental results, and a variety of operational and financial metrics. While a large and comprehensive financial statement package makes for plenty of in-depth reading by the management team, it also plays havoc with the closing schedule. The primary issue is that any report not automatically generated by the accounting software can require a considerable amount of time to prepare by hand. Further, it may be necessary to use separate information collection systems to obtain the data needed for these additional reports, and that additional information may not be ready at month-end.

The solution is quite simple. The contents of the primary financial statement package should only contain those reports that qualify under both of the following criteria:

  • The reports are automatically generated by the accounting system; and
  • The information from which the reports are compiled have been recorded in the accounting system no later than the scheduled issuance date of the financial statements.

These criteria exclude any manually-prepared reports. You do not have to eliminate these additional reports entirely, but you should delay their issuance until after the financial statements have been distributed. By doing so, the accounting team does not waste time on anything other than the primary product of the closing process – the financial statements. In particular, consider shifting to a separate reporting package any information about the cost or profit of specific products, services, or contracts, since these items are usually compiled manually.

Also, if there are a number of metrics related to the company’s financial or operational results, consider shifting them to a separate report; they can take time to prepare, and so may delay the issuance of the financial statements.

If you are uncertain about which parts of the financial statements and related metrics are being read by the recipients, interview them to find out. Based on this information, you may be able to eliminate large blocks of information from the financial statement package.

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