The economic recovery of recent years is enabling CFOs and FDs to revolutionise their finance functions and set priorities to aid them to increase margin and improve earnings performance. This newsletter has been designed for a community of finance executives to provide facts and trends that will help pave the way towards the business critical decisions required by a modern business.
Surviving the Year End
As 2015 draws to a close, many organisations will be moving into their Year End. For Insurers, this also means Solvency II and related regulatory returns. On top of this, there’s audit, group reporting, and other requirements.
Of course, a year end is best described as an “enhanced” month end. What makes it interesting is the extra scrutiny and analysis that it attracts. Inevitably we discover and deal with issues that perhaps were not spotted in, or deferred from other “lesser” month ends. We’re all human, after all.
Despite all of this, we’re challenging you to try and think of your Year End process a little differently.
Year Ends are made up of monthly, quarterly and yearly activity, each with its own challenges.
We’ve got to do it, so we might as well try to gain as much useful information from it – so much the better if it tells us how well our Month, Quarter and Year Ends work for us and where the interventions lie.
Let’s take a different view of things and consider 2016 as a production line. A clean and trouble-free 2016 Year End would then be the product, and we have a year to get there. As a production line, we should understand where our quality breaks are, how good we are at sourcing good raw materials, and, most importantly, we have a strategy to solicit and act on customer feedback.
There may be a cultural change here – manufacturing requires a climate of continuous improvement. As finance people we can quickly understand the numerical impact of this going wrong in say, a large manufacturing business (and there are some spectacular cases to refer to).
Recent research indicates that 53% of CFOs have indicated that the biggest pain point of period end close is manual adjustments. Following some simple steps below can help make a dent in this pain for 2016.
1. If it Moves, Log it
It sounds boring, but it is an essential starting point. Ask your team to record a list of every manual adjustment they do and the time they spend on it. In the log, separate your adjustments into coding and posting corrections, foreign exchange, system integration issues, accruals, and other relevant categories.
Lastly, file the workings in a folder for later analysis – in manufacturing terms this is the prototype for further automation.
2. Obtain Customer Feedback
Now is a great time to establish your quality criteria. How would you like to be measured on your output?
After the year end is over, perform a review of your products against your success criteria. Ask for feedback from the business and your reporting lines to understand how well you are doing. Was the information optimally presented? Too much, too little, was the focus right? Could we answer all the information requests quickly and accurately? Was it right?
Following this, you should talk to your stakeholders to understand better what their issues are and prioritise your next actions.
3. Plan for Success
With a prioritised list of items, it makes sense now to tackle your challenges. Aim to achieve some quick wins, and establish a plan to deal with the bigger ones.
4. Review and Measure
Measure how well you are doing, and keep the feedback loop running!
The vision: let’s imagine that you started 2016 with a clear understanding of where your existing process weaknesses lie, and with a plan to deal with these effectively. Now, what will your next Year End look like?