How long to prepare monthly management accounts

How long to prepare monthly management accounts

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Hi there,

I wondered if someone can help. I currently work for a medium size company and prepare the management accounts according to UK GAAP in 2 weeks. I have seen job vacancies to work for a large multinational company which SOX and IFRS being implemented. They expect accounts to be prepared in 4 days. This seems impossible to me, if you have to reconcile income/prepare deferred and accrued income schedules, fixed assets, salaries,close purchase ledger and prepare all journals. Is anyone currently doing this and how feasible is it to do?

Thank you!

Replies (22)

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By qhas
21st Feb 2015 13:39

Management accounts
Use Equalisation accounts , sometimes called Reserves accounting. Remember it's Management Accountants

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By Moonbeam
21st Feb 2015 14:03

Depends on the company/job surely

Every company has different ways of doing things. Management accounts for one could take much less time than for another depending on the quality of the original input/data capture and how much detail is required.

I suspect your concern is having a employer who has unrealistic requirements of their accountant, which of course is all too common. You can only guage whether it's realistic or not by attending interviews and asking detailed questions. At the end of the day, the bigger the company the more chutzpah you're going to have to have to persuade non financial directors of changes they need to instigate if you consider their time frames unreasonable.

 

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By tom123
21st Feb 2015 14:24

Are you in practice, or working at the company.

Are you in practice, doing management accounts 'from a distance' for the company, or actually working full time in the company concerned?

You should point out that there is a trade off of accuracy against speed. Ie if you need to close quickly then things like prepayments need to get posted on about 20th of the prior month, and also depreciation etc. You then 'catch up' in the following month.

You should adopt a higher value before capitalising assets etc - so there is less work on FA.

With regard to GAAP, I am blissfully unaware of that for most of my working life. Remember management accounts should be arranged to suit the needs of management and no-one else. Formats and layouts should be tailored.

Most control accounts are somewhat roughly checked for the current month, and then tidied in arrears when time permits.

Assuming everyone takes on board the above, I see no reason why you can't close in 4 days. Ideally you need a template that self populates from the accounts system (ODBC connections are good here, along with pivot tables) so you don't need to spend time re-entering TB data.

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By Gary Hornby
21st Feb 2015 16:24

What tom123 says
Spot on!

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By savvyfunaccountant
24th Feb 2015 23:38

thank you all!

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By Jack Jackson
26th Feb 2015 11:58

Lot of Guesstimates

Working to a four day timeframe means most things would be estimated, and although over time those estimates would be pretty accurate, there would be a trade off between accuracy and time spent. Too many adjustments to make for my liking!!!

I'm able to give my directors a first stab at day four, then a final at day eight, with just a few amendments, they seem happy enough (if they even look at them) lol

 

 

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By James_Whitelegg
26th Feb 2015 12:21

Yes we can

We produce accounts in 4 days for 3 companies, so it is doable.  However I have a team of 3 to help, and we don't perform the reconciliations until after the reporting deadline.

 

Tips: use automation as much as possible - have templates etc, already set up in Excel so you can just populate the numbers. Also import transactions into your ledgers if the software lets you. Also things like deferred income and salaries can usually be posted on the last day of the previous month.

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Replying to kestrepo:
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By J T
26th Feb 2015 12:27

Seconded

James_Whitelegg wrote:

We produce accounts in 4 days for 3 companies, so it is doable.  However I have a team of 3 to help, and we don't perform the reconciliations until after the reporting deadline.

 

Tips: use automation as much as possible - have templates etc, already set up in Excel so you can just populate the numbers. Also import transactions into your ledgers if the software lets you. Also things like deferred income and salaries can usually be posted on the last day of the previous month.

 

and I second this succinct reply, posted while I was typing.

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By J T
26th Feb 2015 12:29

Depends on the system

It really depends on the complexity and the system.

What you need to be clear on:

- how many staff are working on it

- when the subsidiary ledgers close

- whether they have realistic expectations.

With regards to IFRS/SOX my experience would be it's not going to affect the turnaround but  whether you have the skills and patience to handle it (it bores me to tears). Decisions about treatment should normally be handled between the month end processes. Materiality will be higher in large organisations. If you are reporting in 000s or millions then the rounding can be sorted out later.

Also it isn't the speed of the turnaround but the set up of the organisation and accounting processes. Remember you still have as much time in the month to do all the back ups and if the system is set up properly reconciling should be a paper exercise and the results immaterial. A lot of the work you mention isn't part of most companies routine. Your balance sheet should be right, the asset register is done in the quiet periods.

I worked for a SME of turnover £20m and got it to the point it was very easy to turn around consolidated accounts in seven days, because we were geared up to it. We would have struggled to get it faster because of closing the ledgers late and the transactions not being uploaded the GL until then.

I worked for a large financial institution which did it in four days and the result was disheartening, because the systems and procedures were terrible (we had a day to do our bit, it updated overnight and then you might find three people had corrected the same error, so you were £1m out not £0.5m). I left quite quickly. They had lots of meetings about how things could be improved, without actually changing anything

At a £15m turnover SME now. My team can produce full detailed accounts in five days, and on day 6 I then do a 6 month forecast. This is despite WIP stock being a manual count/rec and creditors not closing until start of play day 4 (so we get most of the invoices in). I would say we could do it quicker but one of them browses the forums (my coffee may get poisoned).

Good luck to you with thist or any other opportunity.

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By ChrisScullard
26th Feb 2015 12:32

When I worked for a FTSE100 PLC we had to produce a flash on working day 1, final figures by working day 3 and full MI pack (40-50 pages) by working day 5 which included full variance analysis, forecasts, etc.

Sure it was hard work, fairly long hours (although not ridiculous) and no-one could take time off that week EVER, but it was perfectly do-able.

You'll probably find that there is a lot more systemisation and automation in the larger company, and more staff working on the accounts.

Frankly I'd consider two weeks to prepare management accounts totally unacceptable.  The reason to have management accounts is to understand what's happened, why it happened, what's going to happen, what are the risks and what are the opportunities.  I'd hate to let issues continue unknown or miss opportunities for an extra two weeks.

If the accounts are monitored and reconciled on an ongoing basis throughout the month there is no reason to take two weeks to prepare the month end position.  If it does take this long that suggests that systems and processes are inadequate in my opinion.

Sorry to be blunt but everywhere I worked in industry these were the (I think reasonable) expectations.

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By Jack Jackson
26th Feb 2015 12:59

My point exactly

If a company is not reconciling their various accounts until after the management accounts pack is prepared, who is to say that a large error doesn't show itself in those reconciliations.

 

The accounts I issue by day 8 are fully reconciled 

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By Brend201
26th Feb 2015 14:02

Four days after month-end is too slow for many companies, particularly big ones.  

Many years ago, I worked for a fairly big subsidiary of a FTSE100 plc - manufacturing company with sales £30 million and 300 employees in five locations.  When I joined, we struggled to get the monthly accounts done in three weeks.  Eventually, we got to the stage where we were producing (with no stress) accurate accounts (minimal estimates) from the accounting system by lunchtime on day 2.  Audit was completed by end of week 3 after year end with no adjustments.  

So how to do it?  

1. Change your mind-set.  It can be done.  The processes may need to change to improve efficiency.  I also mean that widespread estimates should not be necessary.  

2. Do work earlier in the month. There is usually no need to wait until the last day of the month to post most journals, including payroll, depreciation, prepayments and most accruals.  (Slight disagreement with James above.)

3. Automate as much as possible. (Agreeing strongly with James and others above!)  This should include exploiting all relevant functionality within the accounting system.  For example, many systems allow you to spread prepaid rent into future periods at the time of posting the payment or invoice (see 4 below).  Use pre-built report formats/ data extraction templates to arrive at the end product more quickly, minimising manual data entry.  Buy software to improve matters - the single biggest bottleneck for us was WIP which was taking just over a full day.  We bought Monarch, a data extraction tool (now Datawatch I think) that enabled us to complete the same process in 20 minutes.  

4. Train your more junior staff to recognise items that may have significance outside of the current period - our purchase ledger clerk, no accounting training, became very proficient in handling prepayments and accruals during the month, thus reducing work at month-end.  (e.g. if you have to ask "why is the cost of xxx so much this month" and response is, oops that was a large invoice covering the next six months = wasted time during close-off).  Also, get them to keep track of what is in balance sheet control accounts.  

5. Train your non-financial colleagues to send you relevant information as quickly as possible after month-end, or even before - e.g. stock counts, lists of goods received not invoiced etc.  Try to get them to understand the significance of the accruals concept.  

And no, we did not have a large accounting resource: accounts dept  when we got to the Day 2 reporting was me (FC), assistant accountant (MAAT), purchase ledger clerk, credit controller/sales ledger, two invoicing clerks (quite a complicated process due to the industry and customer base).  And we didn't get consultants or temps in to tell us how to do it - we worked hard to get up-to-date and even ahead of ourselves which gave us time to think about the process.  It is hard to deliver to short deadlines if you are carrying backlogs of work from the last month.  

(Edit: I see Chris's post now too and obviously I fully agree with him.)

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By NHGlos
26th Feb 2015 14:20

It's not just about the month end

As has been mentioned, the general process throughout the month is important: is purchase ledger identifying prepayments, are fixed assets being added when they are purchased and not just at month end, are transactions checked for reasonableness every few days, is the ERP system structured properly (this is a big point!).

When I worked for divisions of PLCs (£7m - £22m turnover, two or three account staff), 4 or 4.5 days was the norm to get everything done, 2 weeks would be a luxury - we even had year end done with two weeks (except for tax and the audit)! The only slack was that you could often get away without submitting last thing on the last day and submit first thing the next day, but we even managed to have the usual early finish on the Friday.

Having moved to a medium private business I nearly fell off my chair when the owner said he would like them in three weeks!

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By Alan Davies
26th Feb 2015 14:25

Not just private sector

Most government departments now report at the end of day 3. 

Its not particularly difficult when you are using a modern finance system if you arrange the processes correctly.  To pull out some of your examples, salaries - why can't you post them as soon as they have been calculated - even when the are paid on the last day of the month they will have been calculated at the very least 3 days beforehand (to allow for BACS), fixed assets - calculate depreciation on the opening balance assets, additions from the month after purchase, close purchase ledger - do it close of play on the last day of the month - if you are running a goods receipting system then you even get your GRNI accrual calculated for you. 

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By James_Whitelegg
26th Feb 2015 15:17

A Blast From The Past

I'd forgotten Monarch - a god-send at a previous company where the accounting system could only print rather than export data.  Solution: Print to PRN print file, open file in Monarch, result: useable data!

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By andy.partridge
26th Feb 2015 16:42

Prescribed method

You should expect a detailed methodology to follow. It will be the way they want it done. It is unlikely that you will be able to make any material changes to the way things are done unless senior folk have expressed dissatisfaction with the current arrangement or accuracy of output.

The higher people go in the organisation the less they will be interested in the kind of detail which can lead to stasis in many an accounting environment.

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By NHGlos
26th Feb 2015 16:49

Job Description

If the job description says "4" days, then they are probably already doing it in that time frame, probably...

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By savvyfunaccountant
27th Feb 2015 12:50

Great insight here

Wow there are some exceptional accountants on this thread, i wish we could get together for a coffee chat. 

I agree that having adequate systems in place will significantly improve things.

Salaries shouldnt take long but tend to if you pay on the last day of the month and have to reconcile several benefits.

Someone mentioned about doing prepayments during the month...how does that work if suppliers send bills after month-end?

I think its possible to close whenever you want, whether or not your accounts will be an accurate true reflection of your reporting month is a completely different thing.

I am not sure how satisfied I would be with an account full of provisions....

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Replying to Accountant A:
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By NHGlos
27th Feb 2015 13:21

Part of the course

savvyfunaccountant wrote:

I think its possible to close whenever you want, whether or not your accounts will be an accurate true reflection of your reporting month is a completely different thing.

When I say closed within 4 - 5 days, I mean proper accounts, any issues should be immaterial. Yes, there may be accruals, but then if your expecting something to be billed quarterly in arrears you may always have to contend with that.

As for any invoices received after month end, that's what an efficient purchase order and "booking in" system is for. There may be differences when the invoices arrive, but these should either be immaterial or not accepted and the variance investigated/rectified.

If I was the one waiting on the accounts (owner, FD, board) I don't think I would accept waiting for invoices and transactions as reason for waiting on the management accounts.

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Replying to Accountant A:
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By J T
27th Feb 2015 14:00

Clairvoyence and provisions

savvyfunaccountant wrote:

Wow there are some exceptional accountants on this thread, i wish we could get together for a coffee chat. 

I agree that having adequate systems in place will significantly improve things.

Salaries shouldnt take long but tend to if you pay on the last day of the month and have to reconcile several benefits.

Someone mentioned about doing prepayments during the month...how does that work if suppliers send bills after month-end?

I think its possible to close whenever you want, whether or not your accounts will be an accurate true reflection of your reporting month is a completely different thing.

I am not sure how satisfied I would be with an account full of provisions....

My apologies to everyone else. I started off interested and now seem to be hogging this thread.

Salaries - bad luck there. You can still do journals when payment is sent two or more days earlier. At a large organisation the quirks such as reconciling benefits become less relevant as they have HR to make sure it wasn't wrong (or at least not materially) in the first place.

Prepayments - you can do three days before month end and either you or PL review the last few days, in the same way they look for late invoices after the ledger closes. If missed you will probably spot reviewing your first draft.

Accuracy is rarely perfect, accountants aren't clairvoyant and others can make mistakes. A colleague spotted we miscoded £13 for the annual return fee 9 months. Its now corrected obviously not material in the month's between.

As for provisions, they are a necessary evil, the larger you get. Small firms can accrue by supplier or sale. The less material individual transactions are the more relevant a provision is. In the news today Lloyds made a £925m provision. Obviously they couldn't have worked that out to the penny (could have run the business better in the first place... obviously).

You do have a bad debt provision don't you?

I'll go get a coffee if you want to virtually join me.

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By Bungo
27th Feb 2015 12:55

Corporate accountant
I have spent my career in multinationals, last 22 years. Yes most will "close" within five days or so after month end. But it is not one person doing the whole process from beginning to end, there will be somebody doing final journals and reconciliations and they probably finish this a few days before the month end. And even after the five days, the accounts will be tweaked and fine tuned and wording will be written and re-written for another month or so.

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By jiatbanus
28th Feb 2015 11:35

"Fond" memories

Employed at the UK end of a US heavy engineering multinational in the late 1960s, in the pre computer days of LSD, with a floating £ and reporting in several currencies, we were required to report to our US masters by telex on the 5th working day after the month end, for HO consolidation. The sound of the punch tape running was always worth a pint or two. Should it not have got easier?

 

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