Month End Accounting the way it should Be Today

Month end accounting has always been a business critical exercise. Without the balance sheet, income statement, and other financial reports this exercise ultimately produces, management could not make informed decisions to keep the company in the right direction and at the ideal operational speed.

Now, in order to maintain optimal business velocity, month end activities have to be carried out as swiftly and as accurately as possible. Delays will only inhibit managers from reacting and effecting necessary adjustments in time. Inaccurate information, on the other hand, obviously lead to bad decisions.

But that’s not all. Never has the month end close been as demanding as it is today. Regulations like the Sarbanes-Oxley Act, Solvency II, Dodd-Frank Act, and others, which call for more stringent controls and more robust risk management practices, are now forcing companies to find better ways to face the end of the month.

Sticking to old month-end practices while striving to achieve regulation compliance can either cost a company more (if they add manpower) or simply bog it down (if they don’t). Among the worst of these practices is the use of spreadsheets.

These User Developed Applications (UDAs) are very susceptible to errors. (See spreadsheet risks)

What’s more, consolidating data from spreadsheets as well as carrying out reconciliations on them is very time consuming. These activities usually require data from outside sources – i.e. a workstation in a different department, building, or (in the case of really large corporations) geographical locations.

Furthermore, if one of these sources fail, the financial reports won’t be complete. This is not a far-fetched scenario, considering that spreadsheet storage and backup is typically carried out by the average end user. This leaves the spreadsheet data vulnerable to hard disk crashes, virus attacks, and unexpected disasters.

Thus, in order to produce accurate financial reports on time all the time, you need a financial/IT solution that offers optimal provisions for risk management, collaboration, backup, and business continuity. Learn about server-based solutions and discover a better way to carry out month end accounting.

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The Future is Smarter with a Smart Meter

Traditionally, electricity and water meter consumption was measured via analogue meters. Utility billing was based on actual consumption units obtained from the meter by meter readers. This entailed physical visits to the metering point. Lots of challenges came with meter reading; talk of customers feeling their privacy is intruded, meter readers encountering hostile customers, dogs, closed gates. The result was estimated bills that were most often than not very high.

Smart meters can be dubbed as the ?next generation? type of meters. Smart meters send wireless electronic meter readings to one?s energy supplier automatically. There are both gas smart meters and electricity smart meters. Smart meters come with in-home displays, which give someone real-time feedback on their energy usage and the associated cost.

Smart meters communicate meter readings directly to utility companies therefore no one has to come to your home to read your meter; and neither are you required to submit meter readings yourself. This not only reduces costs, but leads to more accurate electricity bills practically eliminating estimated bills. Smart meters signal the end of estimated bills, and the end of overpaying or underpaying for energy.

Whereas a smart meter in itself does not save you money, the add-ons (in-home displays) that come with the smart meters and which give someone real-time feedback on their energy usage helps them to reduce the unnecessary energy use and this ultimately leads to better oversight into how to lower utility bills hence better management of one?s energy use.

In summary, a smart meter is a technology that enables energy consumers to see their energy as they use it, a technology where energy is displayed as it is being used and wireless ratings sent. Adoption of smart meters would mean the end of estimated energy bills.

Smart meters are also promising a smart future where all energy consuming devices can be connected to the internet and centrally controlled using computers or smartphones. This means one is able to switch off lights and other energy consuming devices from a central point, hence make savings and this will enable them to have greater control of their energy use, hence more comfort, convenience and life will be cheaper for all. This is the smarter future we are all looking forward to.

Are Target Operating Models strategic compasses?

The short answer is they usually are, because every organisation needs a road-map of where they are going. Target operating models can be complex documents with illustrative details including project management structures, special tools, implementation procedures and management metrics. They can also be simple statements, as for example Winston Churchill?s promise that ?we shall fight them on the beaches, on the landing grounds and in the fields? which gave Britain the strategic direction it needed.

Many initiatives unfortunately fail because managers are ?too busy? to bottom on what their target operating model should say, or simply don’t believe in paperwork. As a result, promising initiatives may blunder off course or die a slow death without them really noticing. We cannot manage what we cannot measure, which is where the management metrics fit in. One of my favourite quotes is ?if you don’t know where you are going any road will get you there? which is what the Cheshire Cat said to Alice in Wonderland when she got lost.

The author blundered through life without a plan because there was no one else with his particular brand of imagination. The current business climate is different because everybody is trying to ramp up, and investors want to know exactly what is going to happen to their money and by when. Hence a target operating model can be indispensable throughout a change or product cycle.

The benefits of having a measurable operations / technology plan can produce powerfully tangible results if the organisation follows through on it. Built-in metrics with milestones are powerful tool for management, and, when they map through to the company financial plan almost irreplaceable as cash-flow forecasters.

Other benefits may include:

  • Shorter times to market and greater agility when launching new ideas
  • Reduced investor risk through a predictable process that’s readily monitored
  • A stable operating environment where there is consensus on direction
  • Greater likelihood of delivering on time and leading to repeat orders
  • A more cost-effective process, with less risk of loss of quality and money

Although it dates back a few years the Wills UK and Ireland Retail model still provides an excellent benchmark of a target operating plan that worked. The strategic goals were exceptionally clear, and they brought in a proven project manager to help them drive the program forward.

We have delivered advanced business management services to many of our clients, and believe you will find our personalised approach time-efficient and effective too.

What Sub-Metering did for Nissan in Tennessee

When Nissan built its motor manufacturing plant in Smyrna 30 years ago, the 5.9 million square-foot factory employing over 8,000 people was state of art. After the 2005 hurricane season sky-rocketed energy prices, the energy team looked beyond efficient lighting at the more important aspect of utility usage in the plant itself. Let’s examine how they went about sub-metering and what it gained for them.

The Nissan energy team faced three challenges as they began their study. They had a rudimentary high-level data collection system (NEMAC) that was so primitive they had to transfer the data to spread-sheets to analyse it. To compound this, the engineering staff were focused on the priority of getting cars faster through the line. Finally, they faced the daunting task of making modifications to reticulation systems without affecting manufacturing throughput. But where to start?

The energy team chose the route of collaboration with assembly and maintenance people as they began the initial phase of tracking down existing meters and detecting gaps. They installed most additional equipment during normal service outages. Exceptions were treated as minor jobs to be done when convenient. Their next step was to connect the additional meters to their ageing NEMAC, and learn how to use it properly for the first time.

Although this was a cranky solution, it had the advantage of not calling for additional funding which would have caused delays. However operations personnel were concerned that energy-saving shutdowns between shifts and over weekends could cause false starts. ?We’ve already squeezed the lemon dry,? they seemed to say. ?What makes you think there?s more to come??

The energy team had a lucky break when they stumbled into an opportunity to prove their point early into implementation. They spotted a four-hourly power consumption spike they knew was worth examining. They traced this to an air dryer that was set to cyclical operation because it lacked a dew-point sensor. The company recovered the $1,500 this cost to fix, in an amazing 6 weeks.

Suitably encouraged and now supported by the operating and maintenance departments, the Smyrna energy team expanded their project to empower operating staff to adjust production schedules to optimise energy use, and maintenance staff to detect machines that were running without output value. The ongoing savings are significant and levels of shop floor staff motivation are higher.

Let’s leave the final word to the energy team facilitator who says, ?The only disadvantage of sub-metering is that now we can’t imagine doing without it.?

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