A Review of Month-End and Quarter-End Best Practices Streamlining Processes Before the End of the Year
As we approach the end of the third quarter, it’s time for more than all things pumpkin spice, falling leaves, and cooler temperatures. For CFOs, it’s also time for quarterly financial reviews and audits. The third quarter is particularly relevant because as we near year-end (for calendar taxpayers), we want to ensure that our financials are in order for any strategic planning and budget planning needs for the new year.
Quarter-End is Also Month-End
Just because it’s time for a quarterly review though does not mean it’s time to put aside our normal month-end review. As a reminder, best practices for month-end financial and accounting tasks include:
Reviewing the general ledger.
Reviewing the balance sheet and profit and loss statement.
Reconciling balance sheet accounts.
Running budget comparisons
Running prior year comparisons.
Reviewing monthly bank reconciliations (particularly for any checks that have not been cleared or any suspicious activity).
Ensuring all bills are current by reviewing Accounts Payable.
Reviewing Accounts Receivable aging.
Reviewing any investment activity.
With regard to specific quarter-end reviews, actual wages paid should be reconciled with any Form 941s that are issued. We always advise our clients to be especially cognizant of any adjustments that need to be made prior to the filing of the annual Form W-2, Wage and Tax Statement. Board and committee minutes required for annual audits should also be approved and filed at this time, and any scheduled quarterly audits conducted. Given our “new normal,” many companies are also taking a closer look at their financial technology at the end of each quarter. With more businesses operating virtually, ensuring your company has the most up-to-date technology and accessible systems is crucial to conducting business efficiently.
Streamlining Closing Processes
While there is no doubt that much needs to be done during a month- and quarter-close, there is always room for improved efficiency in the processes. These closing procedures should not be days upon endless days (or weeks) of analysis of every small detail, particularly when those details have no impact on the company’s big picture or leadership’s decision making. Making this process longer than it has to be costs not only time, but also money.
Leadership needs timely information to effectively run the business. Efficient month-end and quarter-end close processes not only increase timeliness, but also improve controls, and reduce risks. Streamlining these processes gets information to leadership faster for smarter decision-making. Streamlining can include:
Set a goal for a 3-5 day close (yes, it can be done).
Gather a team for the closing process with clear directions and goals. Make sure everyone is in alignment and clearly understands what is expected of them pre-close.
Prepare a detailed close schedule. This should be reviewed at the pre-close meeting.
Conduct a post-close meeting to review what could have been done differently to improve the process.
Continuously implement those improved procedures in future month and quarter closes.
After all, time is money, and no one knows that better than the CFO. Barker Associates has extensive experience in helping companies streamline their month- and quarter-end closes. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
The Pandemic’s Larger Impacts on Financial Reporting It’s About Much More than a Loss of Revenue
Many people incorrectly assumed that the pandemic’s only true effect on a business’s financials was a loss (albeit often significant) of revenue. And while that assumption is not even necessarily true of every business (many did very well), Covid-19 impacted much more—not just financial performance, but also position, cashflow, and balance sheet accounts. There have been impairments to goodwill and other intangibles, effects on inventory, a change in how and when audits are conducted, and impacts to overall company strategy and goals. And these impacts are especially challenging for a company in the growth phase.
If your company is in the growth phase, it’s crucial to think about your options, understand your needs and, more significantly, how they have changed since the pandemic, what numbers are required, and to develop a new strategy. Companies in the growth phase are experiencing positive cash flow. With this increase in cash, they have the ability to repay debt, and are in a better position to seek additional capital from investors to expand their market reach. However, if the CFO hasn’t been carefully monitoring the pandemic’s impact on all aspects of the company’s financials, they likely don’t have their reporting in order to even approach potential investors.
Changing Financial Needs Means Increased Financial Monitoring
We learned fairly quickly in the beginning of the pandemic that liquidity is key to keeping a business from closing its doors in a crisis. The question that plagued many was how to increase liquidity with revenue decreasing? But those CFOs were often only considering pre-pandemic needs and observations, not the changing needs of the company in the midst of the pandemic. Auditors have noted that many accounts, including sales, inventory, and bad debt have been affected, as well as production and distribution.
First, these changing needs require a change in financial monitoring. Cash flow projections and other assumptions used to measure financial instruments pre-pandemic should be adjusted to reflect your company’s new reality. Remember that a majority of businesses have been affected in one way or another, but if that results in their lack of ability to pay you, you’re going to incur additional credit and liquidity risks, increased bad debt, and write-offs.
Cash Flow A careful analysis of your company’s cash flow can help. Some questions to consider about revenue include:
Are accounts receivable being paid?
Are past due accounts being followed up on?
Are late payment fees and interest being charged to customers (your money should not be free)?
Do you need to offer pre-payment discounts?
Should you look at retainers/deposits?
Do you have the capability of setting up auto-payments?
Of course, we can’t consider cash flow without considering expenses. And while there will be a decrease in some, there will be an increase in others. At a minimum, consider the following questions:
How have your office needs changed?
Do you have the ability to downsize?
How much are you saving due to decreased meal and travel expenses?
Where are these savings being utilized?
How much more are you spending on technology expenditures to maintain communications with staff and customers/clients?
Balance Sheet Accounts
Additionally, other balance sheet accounts have also been affected. One issue that warrants attention if you plan to seek outside funding is inventory needs and accessibility. With productivity and supply chains being disrupted, it may be difficult to allocate costs to inventory. There is also the issue of inventory that cannot be delivered because of travel restrictions. This also plays a significant role in the larger economic impact of decreased supply and increased demand, resulting in higher prices going forward.
Goodwill, post-retirement plans, and internal controls are other accounts/issues that require an in depth look at your financials and a pivot in business strategy, as we slowly climb out of this pandemic.
If you’re still waiting for things to get back to “normal,” and analyzing your financials based on pre-pandemic assumptions, you are not doing your business justice. You may think you have enough cash on hand or that expenses are timely being paid, but without meticulous monitoring and a true long-term plan based on our new reality, you cannot forecast or grow to the next level.
This can be overwhelming. But pivoting in your financial planning and forecasting is necessary. Barker Associates has extensive experience in financial statement analysis, plans, and forecasts. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Embracing Negotiations in Leadership How to Break Through Hesitation and Negotiate Your Best Solution
Negotiations are a crucial part of corporate strategy, but not (as some may think) merely for high-stake deals, such as mergers and acquisitions. In fact, leadership frequently requires negotiation on nearly a daily basis. And good leaders understand that negotiating is a skill that needs to be developed, just as with any other leadership attribute. Yet, many avoid it unnecessarily … and often, detrimentally. They tend to be more concerned about the objections and perceived conflict they believe negotiations brings about than with the feasible solutions they uncover. Some feel they lack the confidence to ask for what they want or need.
Underlying all of these concerns is age-old fear, and in particular, fear of failure or rejection. This is the fear that likes to stop us in our tracks, causing us to hesitate in the belief that we are safer that way. And, as we all know, the only way to grow and truly get what we want is to push that fear aside and get comfortable with being uncomfortable.
In addition to the uncertainty and fear that can arise in preparing for negotiations, the pandemic has also actually affected how we negotiate. Non-verbal communication and body language are important elements in connecting with others, especially during negotiations. However, with the increase in virtual negotiations, our view of the other person is restricted to computer screens or smartphones. Without the ability to fully see a person’s body and, more specifically, his or her subtle movements, it becomes more challenging to anticipate their acceptance or objections and proactively work toward solutions. But while their individual preferences and comfort levels may be more difficult to ascertain, they are not impossible if we remain mindful of them throughout the process.
Finding Opportunities to Negotiate
If you find yourself shying away from negotiations, it’s time to start thinking about why, and recognizing the numerous opportunities that surround you each day to do so. Like any skill, it takes practice and development. Utilizing average encounters will increase your confidence as you move into negotiations with higher stakes. Even asking for a discount on an item you are purchasing and asking your cell phone service provider for a better rate are, in fact, negotiations.
One could argue it’s not worth the effort or the time to engage in these activities, but that’s the fear talking again. Even if you don’t care about saving a few dollars at a store, the investment in building your negotiation skills and confidence is invaluable. Avoiding negotiations in these “not worth it” circumstances leads to avoiding them in other “very worth it” ones.
Going into any negotiation, you can also hone in on your skills by considering the following questions:
Is the situation fair?
Do I deserve a better outcome than the one I have been offered?
Am I feeling hesitant or confident?
How can I connect with the other person to come to a better resolution?
Tip 1: For in-person negotiations, pay close attention to the other person’s body language and try to anticipate and address objections before they ask them.
Tip 2: For virtual negotiations, take the pulse of the other person often. Repeat what they’ve said to ensure you are understanding correctly. Ask them if they have any questions throughout, and pay attention not only to their words, but to their tone.
How can I cultivate the relationship?
How can I close the deal?
Negotiating is really about making the conscious decision to do so, rather than avoiding it all together. Be mindful about recognizing and evaluating the potential for negotiations and that it may look a bit different today than it has in the past. But underlying it all is always relationships, confidence, and the mindset to put yourself in a position to strategically approach the deal. Ask for you what you want, be fair, work through the objections, and get better outcomes.
As with any skill, the more you practice – even with “low-stake” negotiations, the stronger your skills will become. If you need guidance, Barker Associates has experience working with CEOs on negotiation strategies and skills, particularly with finances, lending, and mergers and acquisitions. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Time management is one of the most useful, yet often most difficult, skills a CEO can master. There is arguably no other role in corporate America with more functions, time restrictions, pressure, and distractions. Add to that the transitions and contingencies associated with a global pandemic, and time management feels like more of a conundrum than a skill.
Through the past eighteen months, CEOs have had to learn the art of leading remotely, and found that doing so has its own unique time management issues. CEOs learned to use new communication tools, change meeting formats, and spend time inspiring teams from afar. Now, many are going back into the office for a new hybrid workforce model. In this next transition, CEOs shouldn’t forget all that they knew from pre-pandemic time management, but they should also incorporate what they’ve learned and what worked well with virtual time management.
Fundamentally, the issue is that while our virtual world saved businesses during a time when we could not head to the office, it also opened us up to, at a minimum, the perception of 24/7 availability. Historically, many CEOs struggled with boundaries and time management because they were trying to accomplish more than was physically possible in a 24-hour period. However, with virtual accessibility, the problem has been exacerbated. And now solutions for a hybrid model must be developed.
While not everyone is on the same page about the continuation of remote work (a Reuters article noted what JPMorgan Chase & Co’s chief executive said about a hybrid model: “It doesn’t work for those who want to hustle. It doesn’t work for spontaneous idea generation. It doesn’t work for culture.”), many CEOs are accepting a hybrid model. Essential to this model though is appropriate time management, taking what was learned and applying it to this new reality.
Time Management Tips
At some point, we’ve all likely heard the time management tips for CEOs and other leaders to increase efficiency and productivity. But this time of transition begs the question—How many of those tips will remain the same in a hybrid model? Many of them will, with some added rigidity, but there will be a few nuances.
Delegate or shorten meetings. A report tracking CEO time management showed that 72% of a CEO’s average 62.5-hour work week was spent in meetings, leaving little time for self-development or for developing strategy. Limiting your presence in meetings, whether face-to-face or virtual, creates space and time to focus on what is necessary.
Set more rigid boundaries. Block that newfound time from attending fewer meetings and consistently use it for activities that require more high-level thinking, including strategic development. Fiercely protect that time as if you were meeting with your top revenue-producing client.
Delegate, delegate, delegate. While a crucial key to time management, delegation has been an issue for many CEOs long before the pandemic (and likely will be one long after). Too many CEOs spend too much time on operational functions, or even on micromanaging. Both everyday operational tasks and the management of those tasks must be delegated to others on your team. Remember, you hired them for a reason—trust that they can handle it.
Prioritize. Use the Pareto Principle (80/20 rule) when you prioritize your tasks and activities. For those unfamiliar with the Pareto Principle, it states that for most events, about 80% of the results comes from 20% of the effort. You can use this methodology to prioritize what brings about the highest ROI.
In your prioritization, keep in mind the importance of high-quality relationships and that some face-to-face interaction, not just with partners or clients, but with subordinates and team members, helps to develop those relationships.
Reduce participants in your meetings. With virtual meetings, we lost geographical restrictions. As a result, we became accustomed to inviting everyone to meetings, whether they were really needed or not. But doing so tends to lead to increased time in the meeting, and overall decreased efficiency. On the other hand, smaller groups allow for more participation and honesty, getting more accomplished in a shorter amount of time.
Only those needed for a particular strategy and/or on a specific team should be included in meetings.
The Benefits of Time Management for CEOs
Effectively managing your time management helps you prioritize better and avoid getting stuck in the distractions and details that plague CEOs all day long. You are less overwhelmed and have a clearer vision about what you truly need to do to move the needle. And ensuring you are spending your time on those high-level tasks is the best way to ensure productivity for the organization. Additionally, when you master your own time, can better determine where others are having difficulties with their own.
Ultimately, a new approach to time management is needed that is flexible enough to embrace a hybrid work model. Not everything will be the same or go back to “normal.” As always, we must evolve along with our circumstances. And we do that by taking what we’ve learned and working it into our new strategies. As CEOs, it’s imperative to be strategic about not only the direction of the organization, but also about the effective utilization of your time. Remember, if you don’t manage your time, your time will manage you.
Barker Associates has extensive experience in working with CEOs on time management and other leadership functions in the hybrid workforce model. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.