You've completed your Year-End Plan; if you haven’t read last month’s article "How to Successfully Plan Your Year-End”, Click Here for the Full Article

Now it’s time to implement your plan. Successful implementations begin with implementing your plan on the date set. Starting late is not recommended; remember that poor planning always leads to poor results.

Once you’ve implemented your plan, begin monitoring it to ensure each task is being completed correctly, and on schedule. The first review performed is crucial and should be completed as quickly as possible, especially in cases where there’s multiple similar tasks such as reconciliations. 

There’s little consolation; for instance if all of the reconciliations are completed and then miscellaneous reconciling items are identified that should have been fully analyzed and included. These reconciliations will require the individual who prepared them to revisit those items and take corrective action to have them analyzed and included. 

Dedicating a certain period of time on a daily basis (as soon as possible after the start of Year End) to peruse, review, approve, and sign off on each item is beneficial. This time slot should also include a review of the “Audit Schedule”.

There are several advantages to these year end routines being performed as follows:

You complete the upfront review to ensure everyone has started their responsibilities correctly and are on target

Immediate feedback is given at the beginning to ensure adherence to requirements and deadlines, and

Time for further investigation of items that look unusual and require further analysis

If any portion of the Year End begins to lag behind; the quicker it’s known, the quicker it can be resolved. In some cases, this could be the result of assigning responsibilities to a team member who, at first glance, was thought to possess the skills and experience to complete the responsibilities.  Once recognized the skills and experience are lacking, you’ll have to determine whether it’s worth taking the time to train the individual, or redistribute the work. This could also be caused by an ‘over zealous’ team member(s) who offered to undertake a portion of the Year End responsibilities when they underestimated the time, skills, and knowledge required.

Also, it could be that a team member doesn’t have the required time due to their current workload, or hasn’t made the year end a priority. Of course, this should have been discovered in the Year End planning meeting.

In one of these meetings, the decision was made to hire the services of a Consultant as we realized we wouldn’t have the required time to complete the Year End.  One manager volunteered to take this position over instead of us hiring a Consultant.  He was a well liked individual, and had been promoted just months before I started. He was very good technically; however, hadn’t begun to learn the required management skills. Much needed formal training had not been provided at either the time before the promotion or shortly afterwards. This, too, is a very important topic that shouldn’t be overlooked; however, we’ll leave it for another day.

Although it was quite ambitious of this individual; he was asked to continue this discussion after the meeting.” He was faltering in his position because of his lack of leadership and management skills. We did meet afterwards and he agreed that he had more pressing issues that had to be addressed immediately. In short, he took back his offer of volunteering. Had this not been done; clearly the Year End would have suffered as in the coming months, not only did he not have spare time that would have been needed for the Year End lead position, but he required help to complete his own duties. Note: After months of mentoring, he did go on to become one of the most successful Managers on Staff.  

Many other factors, such as:  unexpected projects, illness to team members etc., can also compromise the Year End from being kept on schedule.   If this occurs, revise your Audit Schedule to redistribute the duties to those who possess the skills and the required time.  If the situation is serious enough; a Consultant would have to be brought in to assist.  Skilled Accounting Consultants can be hired to come in for just a few days or weeks, and are ready to contribute upon arrival.   

Monitoring to ensure everything is being performed accurately and on time is necessary however, have all the steps been taken to ensure the Financial Statements are correct? Checks performed monthly become imperative at Year End.  Although this is an article in itself; some of the better known methods are listed here. There’s working capital analysis, month-over-month, year-over-year, trend analysis, percent, and ratio analysis, ROA, ROE, ROI, EBITDA, Price earnings ratio etc. that help us determine the validity of the statements. If you see any significant differences; this is the time to analyze them. Use a mix of percentage and dollars for the analysis as the difference could be a small percentage; but a large dollar item, or vice versa.

Keep in mind this exercise may help prove the validity of the statements and may also alert you to certain observations. For instance, has your cost of sales increased dramatically over last year, if so; why? How about A/R or Assets such as Computer Equipment: for example has everyone decided to buy a new computer to replace the one purchased a year ago? Is there a spike in purchases in the last month of the Year to ensure the current Budget level be maintained for the upcoming year?  This, too, will be addressed in an upcoming article.

These anomalies are all fine discoveries that should have arose and been dealt with on a monthly basis but now must be addressed at Year End, and any time you’re reporting externally. Any finding not having an impact on the Statements should be noted and addressed once the Year End is completed, as such findings could potentially have a possible future benefit to the company.  For example, investigation of these findings could provide the organization with a dramatic improvement in the New Year. At one organization; daily reviews of cost-of-goods manufactured, and focusing and acting on those with the largest unfavourable variances produced a ripple effect of improving all product lines and adding millions to the bottom line in a very short period of time. It also produced a more cohesive team dedicated to doing it right the first time and finding a better way; no matter what. This led to greater triumphs and a sense that we could improve anything within our organization; and we did.

Once the requirements of the Audit Schedule have been completed, they are presented to the Audit team/s. The initial meeting to provide the details might not take long; but questions asking for clarification of the information usually arise shortly thereafter. 

If it hasn’t been done already, it’s important that you discuss the interaction process of the Auditors with your team. The requests of the auditors should be addressed immediately. They, too, have a schedule to adhere to and if they're late, your audited statements (where applicable) may also be late. If they take additional time; your organization will also be asked to pay for the additional audit time.

Written by: Paul J. Calleri, CMA of Paul J. Calleri, Consulting, Principal of “TheGAAP.net” – Principal and Editor of “The Business Zeitgeist” and the “IFRS Zeitgeist” newsletters.

Please note: Please share your comments and any tips you have to improve everyone’s Year End:  pcalleri@thegaap.net