Bottom Line Tip #11: Using Manufacturing Theory to Streamline the Financial Close

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One of the most challenging core functions in finance today is the financial close. Every company, public or private, large or small - develops, manufactures, and delivers a set of products and services. Finance delivers financial statements as a product to its many stakeholders who have a right to expect that the company uses the same level of diligence in producing these statements as they do in delivering the other products and services that they sell. Consider the actions of managers at the manufacturing level. In their quest to ascend from zero to Six Sigma, they have been able to reduce costs, improve cycle times, increase customer satisfaction, and produce higher quality products. Finance should be no different and must require the same amount of quality rigor and focus to achieve similar process improvements. It is possible for financial statements to come off a production line with the same level of precision and quality as semiconductors, cars, or bank statements.

To optimize the monthly close cycle, finance must align the organizational perspective around the clearly definable phases of a successful close production:

• Transactional Processing

• Controllership Validation

• Reporting

• Maintenance

Finance must invest properly in the full utilization of the entire 30 day cycle with integrated leadership of these phases. When working within the phase concept, it becomes easier to focus on specific inputs, outputs, and deliverables. The ability to extend resources into partnered BPO functions or retained shared service centers becomes more pragmatic within defined best practices of role sharing.

Using manufacturing theory on close production will shift a great deal of new focus to the maintenance phase of the close cycle. Now corrective actions, process improvement, and non-time critical tasks get scheduled and managed. Planning for the next cycle becomes a paramount activity. Structure is placed around the management of the overall close cycle.

With an integrated close that tightly links financial numbers with the relevant controls, reconciliations, and close tasks, finance can build predictability, flexibility and sustainability into their financial close. Ultimately, the end game will result in increased productivity, reduced cycle times, lower personnel cost; lower external fees, fewer material weaknesses and financial restatements.