Sometimes the initial review of the period-end financial statements comes as quite a shock—the revenues or expenses may be wildly off from expectations. This results in a great deal of frantic research, while the controller investigates possible causes, rapidly makes changes, and issues bland statements to the rest of the management team that the financial statements might be issued a bit late this month. If the financials are indeed substantially different from what management has been led to expect, the blame may even be pinned on the controller, who may lose his or her job as a result.
The best way to avoid this problem is to conduct a daily or weekly review of the financial statements. Yes, this means prior to the end of the month. By doing so, a controller can review revenues as soon as they are billed, and expenses as soon as they are incurred so that any obvious discrepancies can be resolved right away.
In addition, if there is a real problem with the financial results, the controller will know about it immediately, rather than being taken by surprise at month-end, which carries the additional benefit of being able to warn the management team immediately, setting their expectations for the period-end financial results.
Also, by finding and correcting problems well in advance, there are hardly any issues left to deal with by the end of the month, so the financial statements can be issued much more quickly. Thus, an ongoing review enhances the controller’s knowledge of how the financial statements are likely to appear and gives advance warning of problems.
Many controllers would say that a daily review of the financial statements is an excessive use of their time, since a review on each business day of the month piles up into a formidable block of time. This is true, so the time must be used wisely. For example, if there are repeated accounting problems with just the revenue-recording part of the financial statements, it may be sufficient to review only the sales each day. Similarly, if transactions are only posted into the general ledger once a week, then the financial statements will only be updated once a week, reducing the number of times when it is necessary to review the statements.
Also, if there are many minor problems throughout the financial statements, the daily review chore can be assigned to a financial analyst, with instructions to only notify the controller of major issues. By selecting a review interval that meets the needs of the specific situation, a controller can reduce the amount of labor assigned to this task.
Accounting10 years ago
Check Payment Issues Letter [Email] Templates
Accounting11 years ago
What is Journal Entry For Foreign Currency Transactions
Accounting7 years ago
Accounting for Business Acquisition Using Purchase Method
Accounting11 years ago
Journal Entry for Correction Of Errors and Counterbalancing