In order to properly manage your company you need accurate and timely information. How are sales? Is your marketing program working? Are there any problems in operations? And so forth.
Underlying all of this, you need to have a firm grasp of your company’s financials. For example…
• Are you on track to meet or exceed your goals, or do you have ground to make up?
• Is your spending proportionate to your sales level?
• Is your staffing level appropriate?
• Is your cash position getting stronger or weaker?
• Are you in compliance with your loan covenants?
• Is the information reported in your dashboard accurate?
Unfortunately, if you’re struggling with your month-end close, chances are you’re flying blind. You’re making decisions based on inaccurate and outdated data, and don’t have the necessary data to spot potentially problematic issues or trends before they get worse.
It’s time to turn the situation around
If your month-end closes are not timely and accurate, you probably do not have the right team in place. To change this you need to be sure that your Accounting Department is staffed with people who have the training, time and skill set to ensure all of the following get done:
• Basic accounting activities – Including accurately completing billing, recording purchases and related accounts payable, processing payroll, and maintaining up-to-date general ledger accounts.
• General ledger analysis – A detailed review of the general ledger to identify and research any unusual or nonsensible entries or account balances. This function should be performed by a senior-level accountant.
• Monthly financial statements – Timely preparation of an accurate Balance Sheet, Income Statement and Statement of Cash Flow, all in a format that properly segregates current assets and liabilities from long-term assets and liabilities. This is usually done by the Controller or CFO.
• Variance analysis – A written narrative prepared by a strong Controller or CFO that clearly explains any significant variances from what was expected in the budget or plan, and what caused them to occur.
Compliance with loan covenants – As explained in a previous article, failing to comply with loan covenants can ruin your banking relationship. Compliance with the reporting aspects of your loan covenants should be done by a strong Controller or the CFO as part of the monthly close process.
Need help putting all of this in place? Give me a call. As your part-time CFO, I’m here for you.