The Financial Reporting Checklists Every Firm should be Doing Presented by Rebecca Kelley, CPA Maggie Kennedy, CPA FM34 4/5/2017 3:00 PM - 4:15 PM The handouts and presentations attached are copyright and trademark protected and provided for individual use only.
Financial Reporting Checklists Rebecca Kelley, CPA Maggie Kennedy, CPA Introductions Rebecca Kelley, CPA Consulting Partner RKelley@EKSH.com Maggie Kennedy, CPA Consulting Senior Manager MKennedy@EKSH.com 1
Course Objectives Illustrate financial reporting checklists and how to create them for your firm. Examine three ways to maintain control and oversight without being in the details. Summarize comparative financial analysis for your firm. Audience Participation Why did you choose this session? What are you hoping to take away? 2
Checklists Compliance Checklist Monthly Close Checklist Compliance Checklist Q: What is it? A: Tool for organizing key compliance deadlines, identifying recurrence and assigning responsibility. 3
Compliance Checklist Q: Who is responsible? A: Each task owner is responsible for signing off on his/her monthly tasks. Accounting manager or equivalent administers list. Compliance Checklist Q: How does this benefit my firm? A: Protects your firm from missed deadlines, penalties and risk of loss of institutional knowledge 4
Compliance Checklist Compliance Checklist Key points: Include ALL recurring tasks and filings Globally known and accessible, including executive management Link source documents whenever possible 5
Monthly Close Checklist Q: What is it? A: Tool for managing the month-end close process, assigning detailed task responsibility and approval Monthly Close Checklist Q: Who is responsible? A: Each task owner is responsible for signing off on his/her monthly tasks. Accounting manager or equivalent administers list. 6
Monthly Close Checklist Q: How does this benefit my firm? A: Creates accountability and helps to ensure accuracy of monthly financial reporting. Monthly Close Checklist Key points: Include reconciliation for each balance sheet account, P&L analysis, internal and external financial reporting requirements Identify both preparer and reviewer for each Maintain consistent business day goals for each step in the monthly close process 7
Control and Oversight Three ways to maintain control: Balance Sheet Analysis Income Statement Analysis Key Performance Indicators (KPIs) Balance Sheet Analysis Cash Balance Trend DO: Maintain cash balance adequate to fund operations DON T: Build cash balances as a means to strengthen the balance sheet 8
MAY-16 JUN-16 JUL-16 AUG-16 SEP-16 OCT-16 Cash Balance Current Ratio Balance Sheet Analysis Current Ratio Total Current Assets Total Current Liabilities Indicates firm s level of liquidity <1 indicates poor financial health >2 indicates inefficient use of assets Balance Sheet Analysis $1,400,000 4.50 $1,200,000 4.00 3.50 $1,000,000 3.00 $800,000 2.50 $600,000 2.00 $400,000 1.50 1.00 $200,000 0.50 $- - Cash Current Ratio 9
Balance Sheet Analysis Days in Accounts Receivable Average AR Balance (Net Fees / 365) How timely is your firm collecting fees from clients upon delivering services? How does this affect the firm s cash flow? Balance Sheet Analysis Days in Accounts Payable Accounts Payable Daily Purchases How timely is your firm paying its vendors? How does this affect the firm s cash flow? 10
MAY-16 JUN-16 JUL-16 AUG-16 SEP-16 OCT-16 Days Cash Balance AR/AP Analysis 45 42 $1,400,000 40 40 $1,200,000 35 34 $1,000,000 30 $800,000 25 28 27 24 28 25 $600,000 20 23 23 $400,000 15 15 14 $200,000 10 $0 Axis Title AR Days AP Days Cash Balance Income Statement Analysis Net Fee Trend 13-month trend reveals seasonality, prior year comparability Are net fees growing at the expected rate? 11
Income Statement Analysis Personnel Expenses as % of Net Fees How efficiently is the firm utilizing its human capital? Are fee rates in line with growing salary and benefit costs? Income Statement Analysis Operating Expenses as % of Net Fees How do the firm s operating expenses fluctuate with revenue? How are operating expenses scalable or controllable? 12
OCT-15 NOV-15 DEC-15 JAN-16 FEB-16 MAR-16 APR-16 MAY-16 JUN-16 JUL-16 AUG-16 SEP-16 OCT-16 Income Statement Analysis $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- Net Fees Personnel Expenses (Producers) Operating Expenses Key Performance Indicators Productivity Utilization Blended Rate Partners: Other Producers Utilization Rate Average number of billable hours for producers Gross fees divided by gross billable hours Number of non-partner producers divided by number of partners Number of billable hours divided by total hours for producers 13
Key Performance Indicators Client Value and Producer Efficiency Write-downs Net fees Realization % Net fees per FTE Produced billable fees not billed to the client (various reasons) Gross fees less write-downs Net fees divided by gross fees Net fees divided by total full time employees (can be segregated by level or position type) Key Performance Indicators Profitability and Operational Efficiency Days in Unbilled WIP Collection % Unbilled WIP as % of Gross Fees Average unbilled WIP divided by daily net fees Fees collected divided by fees billed Average unbilled WIP divided by gross fees 14
Questions? 15
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