By John Orlando, CFO, Centage Corporation
A perennial financial planning goal for CFOs and controllers each year is to shorten how long it takes to close the month. In doing so, today’s financial professionals could empower resources to focus on strategic initiatives across the organization focused on improving efficiencies, driving innovation and enhancing the customer experience. But most financial professionals are so bogged down in the traditional process they don’t have the time or bandwidth to make changes easily. The following article outlines three practical steps to more efficiently close the books without sacrificing accuracy.
Step 1: Identify Your Motivator
Before you dig too deep into the metrics, you’ll want to really zone in on why you want to close sooner. The more precise you are about the reason, the better you’ll be able to articulate it to your team.
- Are significant mistakes getting carried forward into the next month because they just weren’t noticed until after close?
- Are you meeting filing deadlines by the skin of your teeth? Is it the printing schedule, tax filings, or your 10-K reporting? Or all of the above?
- Does having a small team mean restricting which balance sheet accounts you’re able to review at month end?
Step 2: Conduct a Review
It’s not just about getting done sooner. It’s about making sure you have enough time to complete the financial close activities, give sufficient time to the business owners to review the numbers, and for you to produce the reports that you need to run your business. Here are a few metrics to consider:
- Find your bottlenecks. Track the completion times of each activity then zero in on what looks out of sync. Are the accruals not being done earlier because of a backlog in A/P? Was the consolidation delayed because you didn’t receive timely reports from an overseas office?
- Consider the current close deadlines. If the duration of time from the end of the reporting period to when the financial statements are issued were to be shortened, would something suffer?
- Check the number of adjusting entries that were made. Are the main problems from posting mistakes or is it due to coding errors by a team member using an old chart of accounts?
Step 3: Implement the Financial Close Solution.
Now that you’ve identified the key time-consumers during close, it’s time to put some changes into action so you can see real results.
- Prepare and review the close schedule as early in the month as possible to get your team all on the same page.
- Communicate your timeline to all department heads so they take ownership of their revenue goals and expenses throughout the month. It will also encourage them to be timely in providing the data and operational reports your team needs to close the books.
- Consider daily or weekly balancing for A/R receipts, A/P checks, and invoicing if you’re not already doing them.
- Don’t sacrifice accuracy for speed. Meeting those deadlines is critical but doing so with bad data is worse.
- Use technology to encourage collaboration and streamline the work. Consider what you’ve got and acquire what you need.
I am encouraged by the increasingly innovative role of the CFO to help steer the direction of business today. However, with years of experience in this role, I know firsthand how hard it can be to free oneself from the shackles of day to day financial management to actively engage in those discussions. By taking time to proactively ask the right questions, leverage innovative technology and implement best practices, forward thinking senior financial professionals are empowered to expedite a time consuming but critical process. In doing so, valuable resources will be freed up to support a number of “wish list” projects you likely have sitting on your desk designed to efficiently grow your business.
Sterling gets vaccine boost to hit 8-month high vs euro
By Joice Alves
(Reuters) – Sterling rose to a fresh eight-month high against the euro on Wednesday as Britain’s faster COVID-19 vaccine rollout than in the European Union offered support to the pound.
Although Britain’s deaths from the coronavirus pandemic passed 100,000 on Tuesday, its faster initial vaccine rollout has fuelled hopes for economic recovery.
Sterling was up 0.3% at 88.28 pence at 1049 GMT, after hitting a fresh eight-month high of against the single market currency.
Graphic: Sterling 27 Jan, https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrnbbbve/Sterling%2027%20Jan.png
Geoffrey Yu, senior EMEA market strategist at BNY Mellon, said “the general theme of UK doing well with vaccinations is playing a role” in lifting the pound, which is “not expensive and not over-owned yet”.
On the other hand, “the euro is clearly being undermined by ongoing concerns over vaccine rollout speed and supply,” Yu added.
Versus the greenback, sterling was flat at $1.3736, not far off a May 2018 high of $1.3759 touched earlier.
Hopes for a large U.S. fiscal stimulus package has fuelled risk sentiment in markets in recent weeks, benefiting sterling. Market participants are expecting Federal Reserve Chair Jerome Powell to renew a commitment to ultra-easy policy.
“It’s FOMC today so the adjustment in dollar positions may be playing a role as well,” Yu said.
As Britain left the bloc in December, the City of London said the capital’s loss of some financial business due to Brexit has not been catastrophic and it will thrive even if the European Union “irrationally” blocks access.
“For now Sterling continues to trade more on hope, vaccines, than current reality,” said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets.
(Reporting by Joice Alves in VARESE, Italy. Editing by Alexander Smith and Andrew Cawthorne)
Dollar advances as investors shy away from risk
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – The dollar edged higher against a basket of currencies on Monday, as a burst of volatility in stock markets around the globe sapped investors’ appetite for riskier currencies.
Concerns over the timing and size of additional U.S. fiscal stimulus sent major U.S. stock indexes briefly more than 1% lower before they recovered to trade little changed on the day.
The sharp move in stock markets soured FX traders’ appetite for risk, Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, said.
“Your high beta currencies – currencies that are highly correlated with equity markets and global risk appetites – are tumbling in synchrony with equity indexes,” Schamotta said.
Market sentiment turned more cautious at the end of last week as European economic data showed that lockdown restrictions to limit the spread of the coronavirus hurt business activity.
The U.S. Dollar Currency Index was 0.19% higher at 90.396, after rising as high as 90.523, its strongest since Jan. 20.
The euro was down around 0.28% against the dollar. German business morale slumped to a six-month low in January as a second wave of COVID-19 halted a recovery in Europe’s largest economy, which will stagnate in the first quarter, the Ifo economic institute said on Monday.
The Australian dollar – seen as a liquid proxy for risk – was 0.16% lower against the dollar.
U.S. stocks have scaled new highs in recent sessions even as concerns about the pandemic-hit economy remain. Investors are trying to gauge whether officials in U.S. President Joe Biden’s administration could head off Republican concerns that his $1.9 trillion pandemic relief proposal was too expensive.
Despite the dollar’s recent rebound – the dollar index is up about 1.3% since early January – analysts expect a broad dollar decline during 2021. The net speculative short position on the dollar grew to its largest in 10 years in the week to Jan. 19, according to weekly futures data from CFTC released on Friday.
The U.S. Federal Reserve meets on Wednesday and Chair Jerome Powell is expected to signal that he has no plans to wind back the Fed’s massive stimulus any time soon – news which could push the dollar down further.
Sterling strengthened on Monday against the weaker euro as Britain’s COVID-19 vaccine rollout over the weekend offered support to the British currency.
(Reporting by Saqib Iqbal Ahmed; Editing by Andrea Ricci and Sonya Hepinstall)
London and New York financial services treated the same, EU says
By Huw Jones
LONDON (Reuters) – An EU forum for discussing financial services with Britain will be similar to what the United States has, and it must be in place before market access will be considered, the bloc’s financial services chief said on Monday.
Britain’s Brexit trade deal with the EU from Jan. 1 does not cover financial services, leaving its City of London financial center largely cut off from the EU.
Both sides are committed to creating a forum for financial regulatory cooperation by March, but talks have not started yet, the EU financial services commissioner told the European Parliament.
“What we envisage for this framework is similar to what we have with the United States, a voluntary structure to compare regulatory initiatives, exchange views on international developments and discuss equivalence related issues,” Mairead McGuinness told the European Parliament.
U.S. and EU regulators took about four years just to agree on rules on cross-border derivatives.
Trading in euro shares has already left London, along with a chunk in swaps trading. That questions the value of any future EU access given that many banks and trading platforms from the UK have opened units in the bloc.
McGuinness said regulatory cooperation will not be about restoring market access that Britain has lost, nor will it constrain the EU’s unilateral equivalence process.
Equivalence refers to EU access when Brussels deems a non-EU country’s rules are similar enough to the bloc’s.
“Once we agree on our working arrangements, we can turn to resuming our unilateral equivalence assessments… using the same criteria as with all third countries, including anti-money laundering and taxation cooperation,” she said.
Britain plans to amend some EU rules.
“The United Kingdom intention to diverge requires a case-by-case discussion in each area. Equivalence and divergence are polar opposites,” McGuinness said.
“I am optimistic that over time, through cooperation and trust, we will build a stable and balanced relationship with our UK friends.”
(Reporting by Huw Jones; Editing by Dan Grebler)
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