Blog Post

Why You Need a Financial Close Plan

If you struggle to issue timely financial statements, or your financial statement falls apart under scrutiny, you need a financial close process and a close plan.

In the blog titled You need a close-process, we discussed the financial close process, and gave examples of close activities.

To close the books accurately and on time, a close process is not sufficient. You also need a close plan to manage the activities of the staff involved in the close process.

Why you Need a Plan

A close plan helps you coordinate all the activities that must be done so you can prepare a financial statement. To see why you need a close plan, consider A Ltd.

A Ltd is a trading company that operates in 8 regions in Ghana. It has inventory at all its regional locations, and it moves inventory from store to store to meet demand. Its year end is 31st December, and it plans to publish its audited financial statements six weeks after the year end.

To meet the deadline, A Ltd must plan the close so it can manage the activities of the head and regional office staff. Without a plan, the accountants risk missing the deadline for publishing the audited financial statement.

Form of plan

For a small business, it could be a list of year-end activities to perform, who does it, and the due dates. A bigger business may have a plan that runs many pages.

What to consider

When you are preparing the plan, consider:

  • Activities

The activities to do, how long it takes, and who performs them.

  • Close calendar

A close calendar sets out the activities to perform, due dates, and who is responsible. You must prepare a draft close calendar for discussion.

  • Discussion with stakeholders

Discuss and agree the close calendar with the key stakeholder involved in the close process.

  • Process improvement

During the discussions, look for ideas on how to improve the process and implement those possible.

  • Complete the plan

After you agree the draft plan with the key stakeholders, you must complete it and get it approved.

  • Communication

Communicate the plan and issue instructions to all the people who will carry out close activities. You should do this early, so they have sufficient time to complete their assignment.

  • Monitor the plan

To be certain you are on track, you must monitor the plan, and when a problem occurs, take corrective action.

Conclusion

A close plan helps you to organise and coordinate close activities, monitor the plan, and take corrective action to ensure you close the books accurately and on time.

A close process and a close plan are essential if you want to issue timely financial statements that can stand scrutiny.

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