One of my college audit professors used to drill into us that we could never check the numbers enough. “You can’t be too conservative with financials,” he would say. That belief is common in our accounting world, where we tend to protect sacred cows and never fix anything that isn’t obviously broken.
Many believe we can be faster or more accurate – but never both. There’s another way of thinking, though. Steven Sterin, former controller at Celanese Corp. (my employer) and now its CFO, fostered the vision that there is a way to do both.
Many accounting processes are so weighed down with checks and balances that the quarterly close seems to drag on indefinitely. There are a couple of problems with that. For one, if it takes what feels like forever to close the books, there’s clearly no sense of urgency. An even greater concern is that excessive re-evaluation can actually introduce errors: you can out-think yourself and have too many chefs in the kitchen who might correct something that was right in the first place.
While I was finance director at Celanese, and under Steven’s vision, I was the project director for an effort undertaken in 2005 and 2006 to collapse the Celanese quarterly close that took six-plus weeks into a five-day close for each calendar month. We took on the endeavor because we needed to be more accurate and efficient. We accomplished it because we could.
At the time we had more than 25 regional accounting centers around the world. Each quarterly close had in the neighborhood of 400 late entries. We had two material weaknesses and dozens of audit adjustments. But since moving from a quarterly process to a shorter, cleaner monthly close, it takes less than half the time it used to. We have just a handful of late entries, are one of the first companies to submit our filings, and we enjoy dinner at home rather than at the office.
Start with Managing Change
We started peeling back the corporate finance complexities by centralizing to three global accounting centers and redefining our close process during a nine-month project. Much of the close work either wasn’t needed or could have been done at other times, leaving only the most critical activities to deal with during close.
The first project wave addressed planning and change management. We had to work through the close calendar backwards to rebuild the schedule. Then we sold the idea and the kinds of process changes that would be necessary to everyone who would be affected – from treasury to systems to sales. Steven was critical to that step, knocking down barriers and spreading the vision.
During the second wave, we tore apart and analyzed our processes in great detail. We called it blueprinting, and we wanted to make certain each process worked well and we weren’t simply speeding up a bad process.
The third and final wave was implementation. We focused on training each group and meeting regularly with all affected teams to ensure the change would be sustainable. We built in governance, metrics and accountability. If it was 12:01 when a task was due at noon, your phone would ring. We even had a healthy bit of competition. At one point, a center leader whose accounting metrics were lagging offered to buy a steak dinner for the entire team if they could reverse that trend.
Over time, we cut costs too. We used to pay outside consultants, and we also reduced headcount through attrition in each region because our new process allowed teams to be more productive. By being more accurate, we reduced the amount of testing, avoided fines and cut audit fees by almost half. With internal forecast reporting minimized and more processes automated, employees could work on more profitable endeavors.
We learned there could never be enough focus on change management and training. One of our board members was an active supporter and helped tremendously in selling the idea to top-level leadership. Some companies have accelerated their close processes but still aren’t able to sustain it over a long period of time. We never want to end up there. Although automated processes fell back to manual from time to time, we stepped up monitoring. Since fully transitioning to the five-day process, we’ve met the deadline virtually every month.
Actually we close in four-and-a-half days, but the conservative accountant in me makes me round up.
Blane Peery is vice president of global business services at Fortune-500 chemical maker Celanese Corp.