We’re shifting toward the end of the first quarter and many financial professionals are getting ready to hold their breath and brace themselves for the coming weeks of late nights, leftovers, and a good deal of pressure. Are you as ready as you can be for it?
The guidelines I included in “3 Steps to a Quicker Financial Close” are beneficial at quarter end whether you’ll be in a crunch to close more quickly or not. This is your first round of producing 2016 financial statements and to get a good look at how 2016 is stacking up against the budget. You don’t want surprises.
Apples to Apples
Comparisons are the heart of financial analysis. How will things flesh out against your budget? How will they compare with the first quarter of 2015? Are you on track with expectations or will you need to revise your budget given new conditions that occurred?
It’d be awesome (and unrealistic) to do a 1:1 comparison across the board. The unusual spike in travel expenses last year from a product introduction might be replaced by capital expenditures upgrading outdated manufacturing equipment at your off-shore plant.
Location. Location. Location.
The real estate mantra that we’ve all heard forever could be our jumping off point for our own quarter-end slogan. “Preparation. Preparation. Preparation.” Okay, maybe it isn’t as catchy and you might not see it show up on reality TV, but it is sound advice.
If you haven’t already done so, circulate your quarter-end close calendar to your team, the department heads, and the execs. Setting expectations of your availability is a side benefit to prompting others to be ready to provide answers to your staff as they need them. You don’t want to have their sudden interest after close if the results from a large purchase order get attributed to a different business segment than what they expected.
Keep your quarter-end schedule on track and make everyone accountable for the financial responsibilities of their departments. Equally important is that you don’t want your team to have to track down someone when crucial sign-offs are needed.
Another factoid we have cemented in our brains is the date when our personal taxes are due. Businesses, of course, aren’t exempt from tax obligations. The state and local governments are salivating for electronic fund transfers of your estimated taxes just as much as the IRS is.
The key to easing the tension about filing business taxes is naturally, preparation. Did the income statement you budgeted for include accruals for taxes? Did your Cash Flow forecast incorporate the fluctuations of the monies needed to pay out your taxes each quarter? If your forecasted Cash Flow is smoothed out instead of accurately reflecting the timing of the remittance of sales and other taxes, it’s just not really useful in managing your organization’s funds.
Imagine a financial statement reader seeing available funds at the end of March without distinctly viewing the forecasted disbursements for the almighty taxing authorities. He might spend those funds on a replacement cement truck before you’ve actually got the money to handle the expense. If the wheels are already in motion for a custom order without the money earmarked for to pay for it, you may find yourself riding way too close to the line of whether you’ll be able to meet your payroll next week or not.
Will your quarter-end statements require footnoted disclosures about committed funds instead of showing them embedded in the data?