Article
December 2012
That’s because best practices are different for every organization and business case. I often get asked about best practices around the close process. How many days is best practice? Unfortunately, the answer is “it depends”. It depends on the people, process, and the systems in place. It depends on the overall complexity of the business and number of transactions. It depends on materiality thresholds and accounts with significant variability specifically at the end of month (hard to make sound estimates and accruals before the month-end). How capable and integrated are the systems to automate transactional activities? What are the critical path tasks and does the staff have bandwidth to tighten up or run tasks in parallel. It may not make financial sense to add staff to shorten the close by a day or two. To try to be Cisco with a 1 day close may not be reasonable. Certainly, if you’re still closing last month’s books as you begin another month, there’s room for improvement.
And that’s the problem with best practices: they can be considered a holy grail, fix-everything, one-size-fits-all solution that don’t adjust to fluid business situations. Best practices are static; they worked BEFORE, but there’s no guarantee they’ll work for what your company needs NOW.
At their core, best practices really represent legacy thinking – a group of “rules” and methodologies that worked previously and are now applied to everything because they’re considered universal problem solvers.
A better way to think of best practices is to start from the metrics you want to achieve. Do you want a one-day turnaround for customer orders? A 30-minute issue resolution window? A two-day close? Begin with the outcome you want and from there, create processes that make those outcomes happen. Only you know your company and the unique resources, staff mix and skill sets you can bring to bear to meet your objectives.
Most of all, don’t look back to what someone did in the past at a company that was not yours. Create your own solutions and you’ll have the “best practices” that work for your dynamic business environment. That way, you’re innovating and leading, not following.
And that’s what makes businesses great.