| Using the Internet for Finding Information to Improve Accounting Processes, Such as the Monthly Close October 20, 2006 I. Introduction. The purpose of this article is to describe the results of using the Internet as a source of information for improving accounting processes. Accounting processes is a generally, broad term. Often the term is used to refer to procedures and practices used in an accounting department to carryout the routine, recurring tasks necessary to produce accurate and acceptable accounting records. Such procedures and practices include: checklists use; software use; reconciliations; consolidations; monthly and annual closes; analysis and reviews; reporting; estimates; accounting system entries; and many more. How such procedures and practices are conducted is a determinant of the efficiency and effectiveness of the accounting department, and therefore improving these procedures and practices is important. One possible method for improvement is to compare (or benchmark) current procedures and practices within an accounting department to what can be found on the Internet about how others carry out procedures and practices, what experts recommend, and suggestions and ideas related to the procedures and practices. To explore the Internet as a source of accounting procedure and practice information, the author searched the Internet for recommendations, suggestions, ideas, best practices, software, and tools for just one of these above listed procedures and practices-the monthly close. The following keywords were used in searching the Internet for monthly closing procedures and practices: checklist; procedure; process; practice; software; reconciliation; automation; management systems; manual; accounts payable; and accounts receivable. Each of these keywords was combined with “monthly close” first, and then “monthly closing”, second as a search. Besides the use of the Yahoo and Dogpile search engines, on-line trade magazine and trade association websites were search using the search capability at these websites. Also, databases of research and academic articles were searched. The next section identifies websites, which have, what the author judges to be, useful recommendations, suggestions, ideas, best practices, software and/or tools related to improving the monthly close. II. Websites With Useful Information on Improving the Monthly Close. About 20 websites and PDF files were found during the search described in Section I above. The suggestions found at these websites have been grouped by the author into four themes, which seem to characterize well the main thrust of the suggestions at the websites for improving the monthly close. These four topics are: 1. Use Benchmarking to Improve the Monthly Close 2. Improving Procedures and Practices Is Important for Improving the Monthly Close 3. Shortening the Monthly Closing Length Improves the Closing Process 4. Various Uses of Software and Greater Automation Improve Significantly the Monthly Close The rest of this section provides links to these websites and briefly describes the monthly close-related suggestions at the sites. 1. Use benchmarking to improve the monthly close. This review article at this site, http://staffinginsider.com/cblog/, maintained by First Financial Staffing, makes the point that if an accounting department approaches the goal of monthly closing improvements by incorporating the benchmarking of what the department is currently doing against other “best or better” practices, this can be very helpful to the accounting department in improving its monthly close. Suggestions on using benchmarking are provided. Also, some monthly closing best practices are discussed. PriceWaterhouseCoopers offers a benchmarking tool at this site, http://www.globalbestpractices.com/home/document.aspx?token=closebooks_overview, with which an accounting department can benchmark its monthly closing procedures and practices against standards for 27 procedures and practices. The standards are based on a survey of about 450 organizations. The use of the tool requires the payment of a fee. 2. Improving procedures and practices is important for improving he monthly close. The next group of websites is grouped together because they list, and sometimes discuss, specific procedures and practices often (or always) used in the monthly closing process. Besides identifying procedures and practices, suggestions for improving the procedures and practices might be found. Generally, the overall theme of the information at the websites is that improving procedures and practices is necessary for better monthly closing. The BusenssFianceMag.com article, http://www.businessfinancemag.com/magazine/archives/article.html?articleID=4205&highlight=monthly%20close, has a checklist of best practices for the monthly close. The article also discusses the importance of benchmarking and provides some standards for closing lengths and the number of personnel used in the monthly closing. The article is dated (1996), but probably offers useful information. This PDF file, http://smallbizlogic.com/resources/newsletters/financialthink52.pdf, from SmallBusinessLogic, Inc., provides a very general list of what the monthly closing procedures and practices should consist of. This list is very general and basic, but might be of use to the small business owner who wants to insure that the company’s books are adequately processed on a month-to-month basis. 3. Shortening the monthly closing length improves the closing process. Several articles, with monthly close information, found at various websites make the point that achieving faster monthly closings usually will result in cleaner, more proficient closings. Maintaining the goal of a shorter closing length is important to achieving an improved closing process. This site, http://www.cfoproject.com/documents.asp?grID=286&d_ID=3425, maintained by the CFO Project and Montgomery Research, reports on a Ventana Research project which concludes that one reason a faster, cleaner close is desirable is because “it reflects a well-designed process efficiently executed”. Factors that influence the close length are identified. This FSN Publishing, Ltd site, http://www.fsn.co.uk/channel_financial_reporting/fast_close_is_back_in_fashion.htm, identifies several benefits of a faster close. Benefits identified include: 1) reflects well on the company’s management competence; 2) cost savings; 3) improved control systems; 4) improved data quality; and 5) more time for value-added activities. This 1998 academic study, http://www.hftp.org/members/bottomline/backissues/1998/april-may/manufac.htm, based on surveys, provides a lot of data on the closing process, such as length of close, percentage of companies that do only (or in addition to monthly closes) quarterly closes, and relationships between company sizes and closing times. Benefits discussed include: faster monthly closes are associated with faster annual closings, faster closes are associated with increased quality in the closing process, and increased quality is associated with reduced costs. This Journal of Accountancy article, http://www.aicpa.org/pubs/jofa/april97/bizind.htm, makes the point that applying too high a standard of accuracy to the monthly close is unnecessary and hinders efficient and effective closing and the benefits of such a close. 4. Various uses of software and greater automation improve significantly the monthly close. This last section perhaps covers changes that will have the most significant impact on the improvement in monthly closings – better uses of software and automation. This PDF file, http://www.capservices.com/PWCpc.pdf#search='monthly%20closing%20benchmarking, from PriceWaterhouseCoopers, reports on the findings of the use of automation systems and monthly closings in large, international companies. Automation systems include: custom developed applications; specialized consolidation products; custom spreadsheet applications; enterprise resource planning (ERP) modules for consolidations; and data warehousing principals. A general conclusion seems to be regardless of the company size and complexity, efficient and effective closing can be enhanced with effective use of automation. This AccountingWeb article, http://www.accountingweb.com/cgi-bin/item.cgi?id=102649, identifies software products that are helping to speed up the monthly close. Software identified includes special software designed for the closing process and special software for inter-company account reconciliations. This article, http://www.iemagazine.com/showArticle.jhtml?articleID=174401603, at the CMPMedia LLC website, summarizes some results of a Ventana Research survey. Automation products identified as important include: consolidation software; dataflow; metadata management; and enterprise spreadsheets (eliminating the need for traditional spreadsheet reliance, a problem). Another article, http://www.s-ox.com/news/detail.cfm?articleID=935, at the Sarbanes-Oxley Compliance Journal, and also based on Ventana Research work, emphasizes the problem of using traditional spreadsheets in the monthly close. This site, http://www.b-eye-network.com/view/3025?jsessionid=2b1a339b035c24b92fcbb65e878bbdf5, maintained by PowellMedia LLC, has an article that describes how an entertainment company was able to decrease the monthly closing time by the use of metadata management, the use of a relational data store, and an online analytical processing (OLAP) reporting application. This Word document, http://download.microsoft.com/documents/customerevidence/8296_Unicorn_Financial_Office_2003_Final.doc, from Microsoft, discusses a better use of Excel, by the feeding of data from a database on a server to Excel, automatically. A financial company was able to use this data feed system to speed up its monthly close. This article, http://www.gtnews.com/article/4639.cfm, maintained by GTNEWS.com, indicates that one of the many benefits of the treasury department’s use of an ERP system is contributing to a faster close. The article at this site, http://www.acceles.com/case1.asp, maintained by Acceles, discuses the selection of a Hyperion Enterprise system because of the affect of the system on the closing process. And, at this site, http://ie.hostedservices.net/Kalido/Newsletter/2005-03/qa.html, maintained by Kalido, is information on Kalido’s ability to support the reconciliation of inter-company transactions. Such reconciliations have been identified as a major problem in timely monthly closings. III. Conclusions. The above results (the websites identified) show that procedure and practice information is available on the Internet related to one accounting process important to all accounting departments – the monthly close. Hopefully, some, perhaps a lot, of this information could be useful to some, perhaps a lot, of accounting departments. Searching the Internet to find the website links which are provided in Section II, evaluating and analyzing the information at these websites related to monthly closing improvements, and writing this article probably took about 20 hours. Therefore, if this were a project for a client, the fee for this project would be about $360 ($18 per hour). The Internet likely can provide similar results for many other accounting, management, and business processes. If you have such a process in your company that you are interested in improving, and comparing (benchmarking) your process to others, I would be happy to determine and analyze the information available on the Internet related to the process that you want to improve. You can email me by clicking here, if interested. Click here to return to the Management Accounting Information Center's homepage. |