Imagine a month-end close process in which the close checklist, reconciliation schedules, and general ledger are in three different places, making it a nightmare for management to know what’s ready for review, if mistakes had been made, and what deadlines had been missed.
Sounds dreadful, doesn’t it? But that scenario used to be a reality for the accounting department at Thrive Market, a membership-based health food retailer headquartered in Los Angeles.
That all changed in early 2017.
Cracks in the steps
The close process at Thrive Market had several moving parts, which made it extremely difficult to ensure steps had been completed and amounts were tied out, according to Ryan Frech, the company’s controller. The data lived in three separate systems—and, of course, those systems didn’t talk to each other.
“We had at least three screens to go through to complete the review,” he said. “Our checklist was maintained on a Google Doc, our reconciliation schedules were in Excel, and our general ledger was in NetSuite. Oftentimes you’d add in email for comments as a fourth.”
Even if you’re sporting three monitors on your desk, that seems inefficient. The steps in Thrive Market’s process went something like this:
- Roll forward month-end close checklist.
- Update dates to match the current calendar.
- Review checklist periodically to ensure deadlines are met.
- Review completed work when Google Doc was updated by preparer.
- Email comments to preparer.
- Re-review once comments were clear, and read through email or discuss any commentary.
- Chase individuals down for sign-offs.
- Close month-end.
If you think that’s tedious to read, imagine completing those tasks for your job.
And because general ledger activity that might impact a reconciliation was sometimes not captured, it left the door wide open for errors, according to Frech.
“An Excel spreadsheet does not get updated automatically if a journal entry changes upon review or is adjusted,” he said. “And sometimes you don’t realize your reconciliation needs to be updated until the subsequent month-end close.”
Not knowing what was ready for review right away and trudging through a manual process to ensure that review notes were cleared correctly was frustrating, Frech added.
“The worst part was trying to solve something after the close,” he said. “We’d realize a journal entry booked after review and sign-off knocked the reconciliation schedule off of the general ledger and pulled out the detail after the fact to update the schedule,” he said.
The accounting department at Thrive Market had only been in place since October 2015, according to Frech, and even though the close process he and his team were using was only a little more than a year old, a change was needed.
Frech had heard about FloQast close management software in 2014 while he was the assistant controller at Bonobos. He went through a demo of the product but decided against it at the time.
“They contacted me again when I moved to Los Angeles and joined Thrive Market,” Frech recalled. “The upgrades since the original demo looked great, so we jumped on board.”
Frech implemented FloQast during the first quarter of 2017, right around the same time other process improvements within the accounting department were being made. He said it wasn’t hard at all to sell his team or Thrive Market’s CFO on FloQast.
“FloQast had created more efficiencies to get things done with less stress in the same time period,” Frech said. “Those efficiencies were enough for everyone to get on board pretty quickly. FloQast is a good tool for communication, accuracy, and time management.”
Most importantly, the number of steps to review and the accuracy of the review have significantly improved, according to Frech.
“It has been tremendously helpful for consistency on a month-to-month basis and a great time-save from a review and reconcile perspective,” he said. “It has allowed us to spend more time on strategic initiatives rather than making sure schedules are tied to the general ledger. It also is a great way for me to check on progress and spot review areas I am not actively involved in without taking up time from the initial preparer or reviewer.”
Download this best practice month-end close checklist from FloQast and get a pre-defined template for checklist items per account, task frequencies, and preparer and reviewer deadlines. You can read more about Going Concern’s partnership with FloQast here.