Here we are, once again, we've discussed a whole bunch of ideas so far in this course for speeding up the close. However, before you even think about calling a team meeting to unleash all you have learned, we need to slow down a moment. Let's say you're serious about meaningfully improving your financial closed process. How do you get started? Where do you begin? Perhaps you've been trying to make incremental improvements but are struggling to garner the support of your team who complains of already being overworked.

Few finance functions are staffed with idle employees just waiting to work on your next special project. So let's work on developing a realistic approach. The financial clothes is a process like any other business process with inputs, activities and outputs, and it typically relies on both technology and people, however, is the people aspect that will ultimately determine the success or failure of your efforts. People are notorious Bad at accepting change. No matter how great you think your ideas may be, so using change management principles will be integral to success. One change management study illustrates the importance of considering the people aspect of any change management initiative.

When effectively considered and incorporated into the design. The project's objectives are largely met, and more often than not go according to schedule. When change management is ineffectively considered, the objectives and the project schedule are rarely met. Let's walk through a seven step change management process, establishing the necessity for changes to the first step. And according to john Kotter, a leading change management expert at Harvard 50% of change management initiatives failed this initial step because the need for change is misunderstood and urgency is not well established. So we need a compelling In legitimate business reason for changing the financial closed process, perhaps you can point to examples of poor decisions made in the absence of timely information.

Perhaps improving the quality and the trustworthiness of the information is important to give management more confident in the decisions they are making. Observe how management decisions are being made in your organization, and determine whether the financial implications are being adequately considered identifying why we need a fast close, and the major barriers that stand in your way is the first step of the process. The temptation is to dive in and begin implementing ad hoc changes. However, this type of approach tends to be unsustainable in the absence of understanding the why first, next, think about the ways to leverage the interests of the CEO and the senior management team. If you've done your homework and step one, then you should already have a pretty compelling case for soliciting support. In this second step, you will establish a guiding team.

Now the guiding team should be composed of key stakeholders with influence and influence includes all the various areas in which the financial closed process touches. So if your financial closed process depends on the shipping department, posting all the shipments into the system at the end of the month, then having someone from this department involved at the design and rollout stage is crucial. The closed process extends well beyond the corporate accounting group, and the guiding team needs to reflect this diversity of accountability. The guiding team is integral to establishing a broad base of buy in and improve collaboration, collaboration between finance and other departments and within the finance function itself. The guiding team will Need to not only kick off the initiative, but keep it going. Several months down the road when interest inevitably wanes or other priorities start creeping in threatening the full achievement of a fast clothes.

In Step three, we define the what the financial clothes is a process like any other and the starting place for business process improvement is to document your current state. Resist the temptation to immediately just skip to the design of the future state. Understanding the current state is so important. You need to identify all the handoffs of information, the interfaces between systems, the reconciliation process, the bottlenecks, the file management tools, and the review activities. Once this has been documented, you can now sit down with the guiding team to brainstorm solutions. challenge the team to imagine what a one day clothes would look like.

Like, think of this as a a more detailed visioning exercise, ask the participants to consider what technology would you have? And what would be the key pieces of functionality? What would the staffing complement look like? And who wouldn't be doing what? And how would the process have to flow to achieve a one day close? Having clearly defined an ideal future state and having a frank assessment of the current state, you're in all likelihood starting to see gaps emerge?

Now, intuitively, you probably recognized a few of these gaps from the outset, but others may have been less self evident. Identify and pinpoint in the closed process where you have gaps and consider posing the following questions. What are the key inputs to the financial clothes on which the accounting function relies that originate in other departments? What are the key areas of really hard analysis that take time to determine the area Appropriate accounting treatment? What are the weaknesses in our processes or our systems that have resulted in errors any efficiencies or workarounds in the past? Now the brainstorming comes into play as you attempt to identify different ways to do it faster, do it earlier, or do it better.

Note that working harder is rarely the right answer you're looking for. You may identify alternative approaches for different issues. Some solutions may be predicated on a larger overriding assumption that we discussed earlier. For example, if you choose to centralize certain accounting functions, or if you choose to adopt an integrated financial accounting system, this will give you a long list of ideas to develop your strategy in the short, medium and longer term. implementing a new system may be a longer term strategy and in the short term, you may just need to find ways to utilize Excel more Effectively, it's important to think about measuring and setting targets in this step. This will help define the future state and monitor progress towards it.

Here are a few ideas on things that you may consider measuring. For example, the number of manual entries posted each period. Obviously, we should be looking to eliminate or automate as many as possible. I was involved in a company that was posting 140 manual entries every month. One of the biggest sources of all these entries was to compensate for deficiencies in our older MRP system. Our medium term solution was to customize various aspects of the therapy.

However, the longer term solution was to really replace the MRP as the organization had outgrown its capabilities. Also consider the number of reviewers or review notes that are passed back to the prepare has another Measure of performance, you can measure completion times. Obviously, the completion time for the whole process is important, but drill down into the critical milestones along this path, including the time for subsidiaries to close the time to close accounts payable, the time to close customer Billings, accrued expenses and inventory. You may break the closed process down into a checklist of tasks and assign a date for completion. This will enable you to measure the percentage of tasks that are completed on time or completed late. And finally, you may want to measure any late journal entries as this tends to be a particular pain point for many controllers as they try to finalize the last mile of financial reporting on ultimately, many companies embarking on the fast close.

I tend to do it in five days or less. leading companies will tend to do it in just one day. In Step four, you're now ready to read it on how your closed process will work by reconfiguring the mix of people technology or process steps that we discussed in our previous lesson. This is where all those ideas are now going to fit into our change management process. Notice how we're now just at step four and only bringing those in at this point, laying the groundwork is that important. JOHN Carter refers to this as thawing the organization to ready it for change.

Let's recap a few of our high level strategies for each of the areas starting with how you should use a new people approach to speed up close. First of all, make it a team effort. Set a team goal for the close, communicate like a team and give everyone a role to play making and holding them accountable. Many close processes rely on some level of Excel spreadsheets. If you can't replace excel in the short term. Be sure to train your staff to improve everyone's proficiency with the tool.

Few finance teams take the time to establish and follow standard XML protocols to document their work and engage the rest of the organization. The whole organization needs to be committed to the fast clothes for it to be successful. All administrative entry of orders and invoices need to be processed in a timely basis by departments outside of accounting, and all the functional leaders should acknowledge that a faster close helps both the company and them directly. Next, let's highlight three ways your technology should be helping you speed up the clothes. Consider an investment in an integrated financial reporting system. And the integrated system helps eliminate the disparate systems with manual interfaces and handoffs, which tend to slow down the clothes.

The more you can get everyone inside and outside of finance, feeding data into one system, the easier will be to execute the fast close. Some integrated financial systems have been Those sorts of tasks lists embedded within the application. They also have messaging and chat functions embedded as well, which creates one seamless tool for managing workflow and communications and progress throughout the close. This automates management of the closed process, which can be highly effective when you have larger staffs or staff members in multiple locations involved in the close. Implement self control reviews using the system generated analytic comparisons to budget and prior period, as well as selected ratios is another good idea. These correlations enable early detection and remediation of errors.

Time spent explaining the financial results is far more valuable than time spent calculating metrics that could otherwise be automated. And finally, let's recap a process oriented approach to speeding up the clothes. We talked about shifting our mindset to begin With the closed process ahead of the month end date, lots of work can happen in advance, analyze your accounts for low hanging fruit like this. Establish a level of reporting materiality that achieves an appropriate trade off between timeliness and accuracy. Identify the issues that matter and those that can be dealt with using estimates. standardize the clothes using a journal entry log and a completion checklist.

These help standardize the process, assign accountability and formalize the documentation to ensure that nothing has been missed. So by this point, you've got a really good plan in place to improve your financial clothes. In Step five, you're now ready to spread this message broadly, both inside and outside of the finance function. Having the change announced and received in the right light is important because as we said earlier, change is really hard for employees. Employees are growing to weigh both the perks of what they have now, along with the points of pain, they now suffer against the promise of a better future and the risk they're taking by buying into the change initiative. If the promise is not compelling, you can expect resistance and a lot of excuses as to why the plan won't work.

So take the time to listen to employees and encourage feedback. Perhaps there's some valid points raised that should be taken into consideration. Ultimately, you'll be relying on them to make it happen. Empowering employees improves by it, but may force you to give employees some discretion on how the objectives are achieved. In Step six, we're going to look to establish momentum. Managing the transition state is a very tricky part of the process, and there's all sorts of perils that could derail your initiative.

The plan should be managed and phased look for early wins that can be implemented on your very next period close. Don't try doing it all at once and it goes without saying that during any sort of transition, there will be more work on our employees plates, not less. Instead set modest, realistic and achievable targets to gather some momentum. For example, challenge your team to reduce the closed process by another day. With each iteration of the process until you reach your target. It's important to not let yourself or your team lose focus.

And there's plenty of distractions that can interfere with your progress in your planning and roll up consider and discuss what will happen if the nature of the business changes. Perhaps a new acquisition comes along or the company reorganizes. Or if you lose a key person, or someone integral to the process is absent for any number of legitimate reasons illness conferences, vacations. Also consider if you allow people to continue working working around the system or not fully enforcing the agreed upon process improvements and inability to generate or sustain momentum is another one of the key reasons that change management initiatives fail. Finally, in step seven, we institutionalize continuous improvement. With each and every completion of the closed process.

There's an opportunity to learn from experience. And don't let these opportunity slip by unnoticed schedule a debriefing meeting, after each close is complete, even if you don't think there's anything to talk about it scheduled the meeting anyway, this meeting should be an open ended meeting that begins with you as the leader asking, so what do you think? Your opinion should be the last one shared if at all. There are a number of different ways to facilitate this discussion. As a finance leader. You could solicit a list of lessons learned and then problem solve solutions to try for the next iteration, focus on the areas where the system is deficient or people are still working around or outside the system, resolving these issues will yield longer term savings.

I like a technique called appreciative inquiry. This technique advocates focusing on the positive aspects of what has gone well so far, and then re emphasizes the vision of what could be this approaches designed to stimulate new solutions as you move along in a positive rather than a negatively framed approach. It's amazing how much more engaged and innovative people are when they're working in a positive frame of reference. Either approach helps develop a list of action items or ideas that will be useful to try on the next iteration. So there you have it, a seven step process for making it happen. Start with the why.

Then establish your guiding team to address the who move on to defining the What by visioning went out one day close would look like and creating a gap assessment to our current state, defining the how brings in the ideas from our last lesson. These first four steps happen even before we start rounding up our staff to announce our plans. Step five presents the plan to staff anticipates resistance to improve by in, we build momentum gradually each month. The good news is there's lots of opportunities to practice the closed process in the run of the year. And finally, we continuously engage staff in reflection with the objective of marching forward towards our goal of the fast close. In our last lesson, I'm going to share a few conclusions based on all we have discussed until then,