A Checklist and Best Practices for an Energy Accounting Close
4 Challenges & Tips for a Financial Close With Remote Workers
It's hard to say if remote accounting teams will be a part of a new normal going forward. Whether remote accounting teams are a one-off byproduct of our current circumstances or a burgeoning movement, though, one thing's an absolute certainty – the financial close must still proceed, and it's up to CFOs and their teams to quickly master it.
That raises more than a few issues for companies that aren’t necessarily familiar with remote teams, especially when dealing with a technical, collaborative project like a financial close. But like most things, it's really just a matter of knowing how to proceed and being aware of common pitfalls. So let's take a look at what a financial close with remote workers involves and help your team make the best of a challenging situation.
Uncharted Territory for CFOs
First things first – this is uncharted territory for most of the industry. There might be a few corners with more insights than most on financial close management with a remote team, but such experience is in no way pervasive. That's because remote workers present additional challenges that complicate an already complex process.
But there’s a bigger question to ask that extends beyond these days of social distancing and the COVID-19 crisis – is this the first step in a fundamental change in the industry? When it comes to both the workplace and workforce, many accounting teams generally operate the same as they have for decades, with longish hours in the office, smart ties, and curious, analytical minds being a relative norm.
But the world was already changing before this pandemic reared its ugly head, with freelancers and the gig economy opening corporate eyes to the benefits of remote working. Now, does that mean a fleet of telecommuters will be handling the financial close from here on out? Hardly. However, leadership will undoubtedly look back on these challenges and pick out new best practices that might help accounting teams and the reporting function going forward.
Challenge 1: A New Environment
To state the obvious, people get stuck in their ways, where the routine of a position, responsibilities, workflow, and workday practically become part of their DNA. But when that routine is broken and teams are suddenly working remotely, they can easily feel like a fish out of water, even when working in their own home. Now, rather than just concentrating on some aspect of the financial close for their company, they’re surrounded by homeschooling, loud neighbors, spotty wi-fi, and a work chair that, to put it mildly, has ergonomic issues.
From a typical company's perspective, a close process that was once a well-oiled machine has become a far more difficult and complex endeavor that relies on displaced people. And since the financial close is a series of interlocking tasks that all depend on one another, all it takes is a single broken link to disrupt the entire chain. Communication falters, work slows considerably, and deadlines that once seemed automatic are now a stretch.
Solution: Provide Your Remote Workers With the Right Tools
Unfortunately, there isn't an awful lot that a CFO or CAO can do for their team members regarding loud neighbors and homeschooling issues. On that particular front, it's simply up to each remote worker to make the necessary changes and create as quiet and productive a work environment as possible.
Critical Technology & Oversight
That said, providing the right tools can go a long way in promoting efficient communication and streamlining workflows across a team. Therefore, either establishing a new oversight function or reworking an existing one can be extremely helpful in identifying and implementing the different elements a remote team needs for a successful financial close, starting with some basic technology:
- Desktops or laptops with any needed firewalls and encryption
- Access to any proprietary or SaaS programs required for close
- Secure folders with access for everyone that needs it
- Slack, Microsoft Teams, or a comparable instant communication tool
- Zoom, Skype, or another reliable video conferencing tool
Remember, these are just the essential tools. There are bound to be others that might be specific to a company's process or workflow. Also, although many of these tools are commonplace in other companies or industries, that doesn't necessarily mean that a newly remote team will be familiar with them. For that reason, it's also important to provide people with documentation and technical support articles so they actually understand how to use these tools.
If a company uses close management software, then hopefully it has remote functionality. Such cloud-based platforms can be extraordinarily useful for syncing sub-ledger systems and other key components of a financial close. Granted, this is more difficult for a manufacturing environment, for instance, with different costing systems, inventory management platforms, and significant fixed assets.
No matter the industry, though, mid-stream through a remote financial close isn't the time to invest in new systems, no matter how robust they might be. It takes time, money, and effort to properly implement such software, all resources better used elsewhere during a close. However, upgraded systems are absolutely something leadership should keep in mind for the future.
In the meantime, there's plenty for the oversight function to do, starting with an ongoing search for weak spots in the process. Its primary job is to provide solutions for pain points that arise and keep everything as smooth and seamless as possible. This would include a game plan for data collection when outside parties or systems don't have remote access.
Challenge 2: Work Bottlenecks & Decision Making
When accounting teams are knee-deep in the financial close process, coworkers can usually walk down the hall and ask people a quick question about something. Naturally, this isn't possible when everyone is working remotely. Yes, Slack and other communication tools come in handy for this sort of thing, but even Slack messages can quickly pile up, not to mention emails and other channels.
This particular hurdle makes the entire process prone to bottlenecks in the workflow where, once again, given the connectivity between the several different tasks occurring at once during a close, one slowpoke can bring everything to a grinding halt. For larger companies that operate in multiple territories with several business units, they’ll have subsidiary reporting feeding into consolidated reports, making the financial close process even more susceptible to breakdowns.
Solution: Streamline, Organize & Delegate
The typical financial close already requires a significant amount of coordination and organization amongst individuals, teams, and departments. With remote workers, the process is even more reliant on precise coordination, where team members simply don't have the same level of interaction as they typically do. However, there are a few quick best practices that can help keep the financial close on track.
The financial close is a bit like a puzzle, where many pieces interlock together to complete the bigger picture. To ensure that one hand always knows what the other is doing, providing access to each other's calendars can be handy for scheduling calls for virtual meetings that take the place of face-to-face communication within an office. Also, on a side note, remember to build in a bit of cushion if possible when integrating third-parties into the close calendar. Things are most likely crazy in those other companies as well, so essential financial data might not always be ready at a specified time.
Create & Monitor Deadlines
A financial close already has several moving parts, and when you have a remote team working on a close, it’s easy for things to bog down. One missed deadline can quickly create a cascading effect that threatens the entire process. To prevent such delays, it’s important for leaders to establish clear and precise deadlines for every team member. Just as importantly, leaders also need to follow-up with their team and monitor every worker’s progress. This way, if a potential bottleneck is on the horizon from an employee falling behind, that leader can be proactive in looking for a solution that will keep the workflow smooth.
Lean & Mean Operations
Try to avoid nonessential meetings and tasks that don't directly relate to the close process. This way, everyone can use their time more effectively without random things popping up and slowing the workflow. Just make sure to perform a risk assessment to ensure that nothing critical is slipping through the cracks since, as important as the financial close is, it's certainly not the only essential responsibility for an accounting team.
Expanding on the previous point, there are other processes and responsibilities that can't be pushed back or moved. In those cases, partnering with an experienced third-party to help with those tasks could very well be a lifesaver. Like it or not, it's all hands on deck during this stressful and time-sensitive process so, if a company is short on reliable deckhands, staff augmentation needs to head towards the top of a CFO's to-do list.
It's not that a company needs to cut corners using remote workers – far from it – but it might be necessary to develop new protocols on the authority for decision-making. This could include empowering particular team members that otherwise wouldn't have the authority to make certain decisions. Obviously, an organization's leadership – CFO, CAO, VP of Financial Reporting, or others – needs to empower the right people and not just anyone. It should surprise exactly no one that a poor choice in delegation can create far worse problems than a mere bottleneck in the workflow.
Also, when there's a change in delegation of authority or part of a business process, a company needs to consider the internal control implications as well. Leadership must ensure that the appropriate segregation of duties still exists, make sure to document any changes to controls or business processes along the way.
Challenge 3: Manual Controls
When employees are operating from remote islands, manual controls are suddenly under a more intense microscope, even when digital bridges connect those islands. As much as CFOs are trying to automate processes and transform the accounting and finance functions – and for very good reason – most industries rely on at least a few manual controls, while a handful are still swimming in them.
For obvious reasons, something like manual inventory controls through daily or weekly cycle counts are next to impossible to complete if employees aren't allowed in the warehouse to begin with. In this case, it's not so much the actual working from home that's the issue but, instead, a lack of access to the facilities. Suffice it to say, the more manual controls a company uses, the more difficult a financial close will be with social distancing still in force.
Solution: Workarounds & Planning Points
Unfortunately, there's no blanket advice we can give to companies facing this predicament simply because every organization and control environment is unique. It's really just a matter of management sitting down with their teams and looking for effective workarounds, including the need for sufficient compensating controls, until things loosen up a bit and get back to some semblance of normal.
However, just as we said with technology and outdated systems, this presents an excellent opportunity to rethink the control environment as a whole. In doing so, management can identify those manual controls that make the entire closing process susceptible to inefficiencies and breakdowns. Using those pain points as a foundation, a CFO can then look toward solutions that remove those sources of risk in the control environment and implement automation technologies or, at the very least, ways to minimize those susceptibilities.
Challenge 4: Worried, Stressed Employees
In the case of the coronavirus pandemic, it's important to remember that employees are also parents, children, friends, and loved ones. Everyone is scared to some extent so, when coupled with a suddenly new work environment, a team working on a financial close will probably have plenty of other things on their mind as well. This is a time when managers might find themselves alternating between hard and soft skills, where one minute they’re designating tasks and shoring up gaps in the financial close process, and the next they’re performing emotional triage for a stressed-out employee.
Solution: Maintain Healthy Communication & Leadership
Throughout it all, leadership and communication must remain a constant, even when the managers themselves might feel like everything is upside down. Going back to the previous challenge and solution, though, it's not just a matter of implementing the right tools. The best technology always enhances the human experience in some way, whether inside or outside of the office.
A platform like Slack, for instance, makes it very easy for team members to quickly send short messages back and forth. However, as important as something like Slack is for a remote team, it's in no way a substitute for short team check-ins, weekly standups, or individual conversations between a manager and his or her people.
These simple yet powerful exercises, all enabled by the right technology, help preserve culture and ever-important employee engagement levels. When worry and stress become additional hurdles in an already challenging financial close, a hearty stew of empathetic leadership, consistent & fluid communication, and good ol' fashioned teamwork & culture can be a much-needed salve for many ills.
Other Thoughts & Best Practices
Aside from these challenges and solutions, we also have a handful of more nuanced insights and best practices, either specifically on a financial close or connected to it.
Internal Controls: Segregation of Duties
Leadership for both public and private companies must keep SOX compliance in mind as well. Obviously, with changes to roles and responsibilities as a team shifts to a remote model, internal controls can easily go sideways. Considerations around the segregation of duties should be front-and-center, since, for instance, a sick or injured team member can throw everything into disarray. Leadership should put compensating controls in place to account for such a scenario.
Think Like an Auditor
Speaking of compensating controls, that's the exact sort of thing an auditor will focus on. Zooming in on the chaos around the COVID-19 crisis, any transactions processed during the peak of the uncertainty and upheaval will carry greater risk simply because so many things were up in the air at the time. Each of those transactions were more prone to mistakes, errors, and potentially for opportunities of fraud. As always, sufficient documentation is crucial to provide a wide, transparent audit trail.
Establish Clear Guidelines
There are only so many hours in the day with much to get done so a company’s perspective on what’s material to their financial statements should play an increased role. Looking at something like late journal entries, for instance, there's no need to keep things open that really won't have much impact since you can always true everything up down the road. Therefore, it's crucial to establish clear guidelines during the close process with the accounting team and streamline as much as possible. Extending the journal entry example, set thresholds for what type of entries will continue to book during the close process to avoid complications, pitfalls, and delays.
Again using the impact of the coronavirus as an example, remote teams are not only trying to complete the close in an entirely new environment and manner than they're used to, but also dealing with additional complications. A close for a distressed company will entail considerations that a financially-sound company won't have to address. For example, if there are indicators of impairment – for both tangible and intangible assets – the remote team will have to do an impairment analysis and all of the accompanying incremental requirements. This is yet another strain on already stretched resources, so companies should look down the road and account for these types of responsibilities, and plan as well as possible.
Build on the Experience With a Post-Mortem
We recommend always conducting a close post-mortem with the team, where everyone involved can openly discuss strengths and weaknesses. From there, they can take those insights and build on them, effectively creating a perpetually-improving close process. These meetings are even more critical when a team is new to remote working since there’s bound to be more stumbling blocks than usual.
Once again, remote working is uncharted territory for many finance professionals. However, whether or not telecommuting becomes more prevalent in subsequent close cycles and reporting processes, the experience is still invaluable. Leadership can take this opportunity to identify pain points in the close process and, just as importantly, remedy them for the future. And when that time comes, Embark will be here, just as we always are, to lead the way.