Eliminating Labor Intensive Period Closes

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We’re often asked how long it should take a restaurant group to close their period books. Our standard answer is 4 days – no matter the number of locations that you have – and your accounting team shouldn’t be working overtime to accomplish this. The four keys to a faster close involve working smarter, focusing on timing, automating the mundane with the right technology, and making sure that operations is owning their numbers. Note that “throwing bodies” at the problem is not one of our solutions. In fact, if done right, an accounting department staff can be thinned out and resources devoted to FP&A, creating a much higher ROI for the company as a whole.

Working smarter means planning the period close. Reduce the number of prepaid items and accruals, keep the level of materiality in mind and eliminate as many non-automated journal entries as possible. Manager profit sharing/bonus programs are one of the biggest drivers of what, how and when accounting items are recorded. Most of these programs rely on comparisons of actual to budgeted results. Simplify the budgeting process and you simplify and speed up the period close. Keep the chart of accounts small – its easier to review and much more actionable. Strive to record items when they occur rather than waiting to record at the end of the period or reclassifying or journalizing them to another location or period. Abide by strict cutoffs for posting. Once a period is closed, it is closed, period.

Get into a routine where sales, vendor invoices, and inventory changes are recorded on a weekly basis. Reconcile the most riskiest parts of your bank statement weekly. Don’t wait until period end to start any of this. The more you can stick to a routine of recording and reviewing information weekly, the faster and more accurate the close will be. Oh, and eliminate general journal entries. They’re time consuming and lead to more questions and confusion than they’re worth.

By all means use the right technologies. Automate as much as you can and integrate as many data sources into your accounting system as possible (but use your above store system to do the heaving lifting for AP integration, sales to cash journal entry creation, inventory and accrual integrations). Make liberal use of EDI, push your payroll company to create your payroll journal entries for you in your format ready to import. Stop using excel (other than accounting import templates). Excel should be the doman of the FP&A function and not a key tool of the accounting function for anything, especially reporting.

Finally, engage operations. They need to own their numbers on a regular basis. A weekly review of key general ledger accounts by a general manager, and holding that manager accountable for errors, is a surefire way of cleaning up accounts and insuring they stay clean. This has to be a priority and it has to be done weekly without fail. If you’re generating a variance report for operations to review their numbers you’re wasting your time. They need to look at the general ledger entries (which is another reason general journal entries are a bad idea), match them up to the invoices they have on hand or their payroll records, etc. and give their blessing to accounting – quickly.

Utilizing the right technologies, planning ahead and engaging operations will greatly reduce labor (and headaches) involved in period closes.

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