Reengineering Month-End Routines

The first place to start is to Post-it reengineer your month-end procedures in a workshop. This takes a full day and involves seven stages.

Stage 2 Stand-up Workshop around the Whiteboard

With everyone assembled, go through the agenda items, starting off with an introduction to best practice. See Exhibit 10.3 for an outline of the workshop agenda.

Reengineering Month-End Agenda for Workshop
Learning Outcomes: After this workshop, attendees will be able to: Discuss and explain why ___________ should have quicker month-end reporting. Implement the steps required to move month-end reporting back to day 3 or less. Describe better-practice month-end routines.
9:00 a.m.	Welcome by Financial Controller
9:10	Setting the scene—a review of better practices among accounting teams that are delivering swift reporting; topics covered include: Cost of reporting in _____ Benefits of quick reporting to management and the finance team Advice from Steve Jobs and Peter Drucker Lean month-end better practices Senior management and a selection of budget holders (who are based locally) will be invited to attend this session, “setting the scene.”
10:30	Workshop One, When activities should start and finish, where separate teams look at the different issues (we will cover month-end close-off of the various teams, listing bottlenecks within and between teams, reporting and forecasting issues, reconciliation issues, etc.)
10:45	Morning break
11:00	Workshop Two, To analyze the month-end procedures, using each team's colored sticky notes
12:40 P.M.	Lunch
1:00	Workshop Two, To analyze the month-end procedures, continues
2:00	Agile processes (scrum and Kanban) and quality assurance steps to make the reports bulletproof
2:30	Afternoon break
2:45	The changes one can make in the next six months to month-ending reporting
3:15	Workshop Three, To set out the appropriate implementation steps to implement quick reporting. Each team prepares a short presentation of the key steps it is committed to making (teams will use PowerPoint on laptops).
4:00	Each team presents reports to the group regarding what changes it will implement and when. The team can also raise any remaining issues. Those SMT and budget holders who attended the first session will be invited to attend this session.
4:45	Wrapup of workshop by the financial controller
5:00	Finish

Assemble everyone to go through the agenda items, starting off with an introduction to best practice. You can access one of the many webinars I have recorded with accounting bodies and play this to the attendees. I recommend you only play ten minutes and then pause the webinar and ask attendees to pair off and discuss what they agree with and what they disagree with. These webinars can be accessed from www.davidparmenter.com.

When you get to the stage in the agenda for the Post-it reengineering, you ask a representative of each team to place the Post-it stickers in time order under column headings day –2, day –1, day +1, day +2, and so forth using a whiteboard. When all the stickers are on the board, it will look like Exhibit 10.4.

Then remove all desks near the whiteboard, and ask all the staff present to come and stand in a semicircle in front of the whiteboard. All staff members need to have a clear view of the board. Having the attendees stand up is important, as it brings everybody in sight of the stickers and, more importantly, as the meeting progresses ensures swifter agreement, as nobody will enjoy standing for over two hours.

Stage 4 Removal of Duplication

I then ask, “What processes have two stickers when there should only be one?” (We want to remove any duplication.) These stickers are removed; see Exhibit 10.5.

Stage 6 Rescheduling

The next stage is to reorganize the key processes and bottlenecks based on better practice. I start off by pulling off the AP close-off sticker and ask, “When could we finish this exercise if we were to adopt best practice?” The answer I am looking for is “Noon on the last working day,” which has been discussed in an earlier section.

With each rescheduling of a process it is important to seek consensus. Invariably, some members of the team will believe the world will end if the cut-off is moved earlier. I simply question the logic and allow a dissenting group to note objections. “If you are proved correct, next month, we owe you a coffee and donut. If, however, you are proved wrong you owe all of us a coffee and donut.” With that statement, I move the sticker to where the majority have agreed (see Exhibit 10.6).

After 45 minutes of standing, these disagreements will recede due to peer pressure.

Some Case Studies Who Used Post-It Reengineering

Organizations in both public and private sectors have improved their month-end reporting using the Post-it reengineering workshop.

The CFO of a famous entertainment center in Australia brought 20 of his team to a training session one September. They all went back and reengineered their month-end. Six weeks later, the CFO announced that his team had the final accounts in his hand—day 3 reporting within six weeks! The CFO had for years been used to very quick reporting with an American company, so you can imagine his frustration when he first arrived at his new position. The Post-it reengineering process unlocked the potential he knew was there.

After holding a one day in-house workshop to reengineer the month-end, a regional council accounting finance team moved the next month-end from seven to two working days. The team embraced both the reengineering exercise and abandonment of the processes that were no longer purposeful. They adopted the day 1 flash report and the daily scrums and noticed much more cohesive teamwork. There is now a much better awareness of what is important and a common view on materiality.

A CFO of a radio station conglomerate flew all her management accountants from around the country for a one-day Post-it reengineering workshop. For some, it was the first time they had met. The workshop was a fun day, and members could laugh at the bottlenecks that they, in some cases, had created. Excel spreadsheets were tossed out, along with other low-value month-end activities. Two weeks after the end of their training, the CFO was asked how the month-end was going. She replied, “What do you mean going? It is finished.” She achieved day 2 month-end reporting, down from day 8, in two weeks.

Post-it Reengineering of Annual Planning and Annual Reporting

The Post-it reengineering of annual planning differs from the reengineering month-end process only in that:

• The time scale is Week –2 Week –1 (last week before annual planning kicksoff workshop), Week +1 (first week of annual plan), Week +2, etc. instead of Day−2, Day –1, etc.
• There will be different attendees at the workshop.

The Post-it reengineering of the annual reporting differs from the reengineering month-end process only in that:

• The time scale is Week –Two, Week −One (last week before year-end), Week +One (first week of the new financial year), Week +Two, etc. instead of Day –Two, Day –One etc.
• The audit manager will be invited to attend along with those involved in drafting content for annual accounts.

The invites to attend both of these workshops come from the CEO, and I have included suggested drafts in the web-based toolkit.

History of Scrum

The scrum technique was developed to radically reduce the time it takes to write new software applications. It recognized that teams in very intense work periods do not always function properly. Scrum (a technique developed in accordance with the Manifesto for Agile Software Development³)—started off as a rethinking of the project management process by Jeff Sutherland, a software developer and onetime fighter pilot. He saw that combat fighter planes and big software development projects had a lot in common. They both had to avoid being shot down. He noticed that large projects were:

• Typically late, with lots of pressure and no fun.
• Run even later as more resources were applied to help speed things up. Typically, the new staff were “tripping over each other” and spending time in long, dysfunctional meetings.
• Frequented with duplication of effort.
• Often over-planned, only to find the “game had changed.”
• Constantly hitting roadblocks. Team members were unable to surmount the roadblocks because they did not have the skills or sufficient clout within the organization.

Sutherland was challenged to produce a new product in six months. He discovered two things: a 1986 Harvard Business Review study, “The New Product Development Game,” by Hirotaka Takeuchi and Ikujiro Nonaka, which noted that the best product development teams looked like sports teams, united in overcoming obstacles with intensity, and a company called Borland, which thrived on daily stand-up meetings.

Sutherland soon developed the “scrum” system (named after a formation in the sport of rugby), which was successful due to the following points.

Instead of spending months planning, you need to have a clear vision of what you are after. With this shared vision, you take a small chunk of work, saying, “If we deliver this feature, we will progress the project.” This chunk is called a sprint (see number 2 in Exhibit 10.7). The key is that this chunk is about two weeks of effort (see number 3 in Exhibit 10.7) and is an isolated standalone part of the project that can be signed off by the customer as, “Yes, that is what I want” (see number 5 in Exhibit 10.7).

Each day, during a two-week sprint, the team meet for a scrum (see number 4 in Exhibit 10.7). The scrum master's task is to manage team members who appear to be slowing down, and to clear the bottlenecks that are holding up progress.

Although scrums typically happen first thing in the morning, you could put them at the end of the day. The key is to restrict the topic matter and make sure it is a stand-up meeting.

Visit Jeff Sutherland's YouTube presentation to help you understand more about this great technique. Search “scrum+Jeff Sutherland+YouTube” in any search engine.

Level Out the Workload (Heijunka)

This is a major breakthrough. It points out that if you streamline processes and eliminate bottlenecks, you can make smaller production runs viable and indeed desirable.

Finance teams should even out the flow of processing purchase invoices to avoid month-end bottlenecks. As mentioned in Chapter 5, we can get major suppliers to send electronic consolidated invoices in regular intervals during the month; minor invoices can be paid by the alternative payment system (the purchase card) and invoices are trapped by the accounts payable.

Build a Culture of Stopping to Fix Problems, to Get Quality Right the First Time

This is an important principle for the finance team to master. Finance teams invariably go from:

• One month-end to another without improvement
• One annual plan to another without improvement
• One year-end to another without improvement

If we adopted this Toyota principle, we would evaluate, after the process has finished, and ask, “What can we do better next month, next year?”

We should reduce the number of internal transactions, the number of spreadsheets, and constantly review each process's timeline to further eliminate waste and shortened timelines.

Use Visual Control So No Problems Are Hidden

Toyota is famous for its “Andon Cord” if problems occur. Andon refers to the pull cord where any worker on the production line can stop production, and ask for help, if they see a fault that cannot be fixed by them or the next group of workers before it will be covered up by a panel. Immediately, lights flash and that part of the production line is halted. The workers further down the line are unaffected, as there is a feed in line with about eight minutes of product to work on. Trained engineers rush in and fix the problem. They have up to eight minutes before the whole production line will be halted. The ability of anyone to stop production and activate the flashing lights to get the roaming engineers to the spot quickly is a major advantage Toyota and other manufacturers have when using this visual control.

Visual control is an important principle for the finance team to master as many reports need a rocket scientist to read them. If we adopted this Toyota principle, we would follow these guidelines:

• All major reports reduced to fit on an A3 (U.S. fanfold) page.
• Use a Kanban board to highlight when staff are having a problem that might delay an accounting process, at month-end/annual planning/annual accounts.
• Use staff notice boards, screens in canteens to report daily progress with the KPIs and KRIs.
• Use only reliable, thoroughly tested technology that serves your people and processes.
• Toyota is never the first to use a new technology developed by third parties. It lets others break new ground. Toyota is, without doubt, the best user of a new technology once it has ascertained that it will serve Toyota's staff and processes.
• This has important ramifications for the finance team in the selection of a new G/L, a planning tool, and a new accounts payable system.

Help Your Extended Network of Partners and Suppliers to Improve

This is an important principle for the finance team to master, as it will involve:

• Ensuring all transactions from major long-term suppliers are paperless.
• Streamlining certain processes to one national supplier (e.g., the purchasing stationery and travel).

Go and See for Yourself to Thoroughly Understand the Situation

Toyota supervisors and managers are always expected to “walkabout” to see for themselves what is happening (Genchi Genbutsu). They do not rely on written reports or meetings; instead, they participate in walkabout.

Staying behind one's desk or around a meeting table will lead to a common perception that the finance team is not adding much value. Staff will be frequently wondering, “What on earth do our accountants do all day?”

Make Decisions Slowly by Consensus, and Then Implement the Decisions Rapidly

Toyota is very slow in the planning stage, thoroughly considering all options, but very fast in the implementation and commissioning, as everything, I mean everything, has been discussed and contingency plans agreed, ready for action if required. The finance team should take heed of this principle, especially with the:

• Changing of the general ledger
• Purchasing of a planning tool
• Migration from annual planning to quarterly rolling forecasting

Become a Learning Organization through Relentless Reflection and Continuous Improvement

One thing that sets Toyota apart from nearly all organizations is its continuous improvement (Kaizen). Every employee is expected to reflect (Hansei) each day, “What could I do better tomorrow?” and come up with at least one innovation per month, no matter how small. The Toyota average, internationally, is ten innovations per employee per year.

All the great paradigm shifters such as Peter Drucker, Jim Collins, and Peters and Waterman have preached the need to innovate and not spend too much time trying to second guess whether it will work.

All the “Built to Last” companies featured in Jim Collins's book came up with their big ideas through a bit of serendipity. Jim Collins refers to it as very much like Darwin's survival of the fittest. Try a lot of things, and only let the strong ideas survive. In the Motorola example, he points out that Motorola sees innovation very much like a growing tree—you let it branch out but you are also constantly pruning.

Finance teams should:

• Hold an abandonment and Kaizen session once a month after the month-end is complete. Ask each finance team member to come to the meeting with one innovation and one abandonment. Using a scrum meeting, ask those assembled:
  • Will this abandonment/innovation be of concern if it fails?
  • Is there any reason why we should not undertake this abandonment/innovation?
• The goal is ten innovations/abandonments per year per finance team member.
• Maximize use of the G/L, planning tool, reporting tool by constantly adopting more of their features.

Rule 1: Never Open Emails before 10:30 a.m

In the good old days, we would handle mail at 10:30 a.m. when the mail finally arrived from the mailroom. We thus started the day with scoring a goal—undertaking a service delivery activity. Now the first thing we do is open up the email, and suddenly one hour has evaporated. Some of us have not disabled the email alert, so we get interrupted every time a new email arrives. As a therapy, I suggest not opening your email until after your morning coffee and then looking at emails only once or twice more during the day. If something is very important, you will get a phone call. This technique will help you get more 1.5-hour blocks of concentrated time in your day. If you do receive the odd urgent email, you could, as a friend of mine does, scan for these at 8:30 a.m. My friend, however, has the control only to handle these urgent emails and then moves on with the day, leaving the replies to the bulk of the emails to late in the day. For me, even looking at the in-box before 10:30 a.m. is too risky as curiosity wins every time.

Rule 2: You Are Not the President, So Do Not Live and Sleep with Your iPhone!

Most of us (fortunately or unfortunately) are not heart or brain surgeons. Our work is not critical to life. Many emails we handle have little or no relevance to where we or our organizations want to go. The silliest thing is surely to handle an email twice, once on the iPhone, “Will get back to you when in the office,” and once in our office.

It is particularly sad when it becomes a part of the company culture for the senior management team to text each other about Monday's schedule during the add breaks on the Sunday night.

I may send the odd email on a wet Sunday afternoon when a round of golf is not so enticing, but I never expect it to be read until business hours.

Rule 3: The Five-Sentence Rule

Treat all email responses like text messages and limit them to something you can count easily: five sentences. With only five sentences, the writer is forced to ensure that all terms, conditions, and papers are attached to the email. This has the added benefit of ensuring the saving of possibly important documents in the document management system.

Rule 4: Have an Attention-Grabbing Header

Make the header the main message of the email. For example: Freeing up more time—reengineering of_____________. Never recycle the header you received in previous correspondence. Make the header more meaningful. If you cannot think of a good email header, maybe you should not send the email.

Rule 5: Actively Terminate Email Exchanges

Manage your email exchanges. If you needed feedback in order to get to closure, often a phone call is better. Ping-Pong emails on the same topic are screaming out for, “Let's speak tomorrow!” Think about your desired outcome and promote a course of action to avoid the table tennis. If necessary, use the sentence, “No more emails on this one, thank you.”

Rule 6: Only Send Your Email to Those People Whom You Are Prepared to Phone

Promote yourself by your endeavors, not by your use of broadcast emails, reply all, or copy correspondence. Avoid sending broadcast emails unless you are prepared to call up each person to advise them that there is a key document that they need to read.

Ensure that you do not add to the spam in your organization as it is creating havoc in many organizations, with some managers receiving up to 200 emails a day.

Rule 7: If You Would Not Put Your Words in a Letter, Do Not Put Them in an Email

Far too often, the content of emails, while amusing, is not appropriate. Be careful about being the bearer of silly jokes. Today many people seem to want to be remembered by their joke telling. Now, don't get me wrong, I love a joke, but when the same people send a couple a week, you do wonder what they do all day. Remember, perception rules everything. You do not want to be perceived as a person whose prime focus is to entertain, such as Ricky Gervais in the UK version of The Office. You want to be thought of in more positive terms.

Rule 8: Master Email Applications' Tools Section

The experts have been busy improving the ways we can handle emails. The applications you use for emails will have many features you have never opened. Many readers have mastered word and spreadsheet applications, yet they know least about the one application they use the most. Master the new features; it will take a 30-minute session with an expert. You need to know and master:

• How to turn off the Outlook automatic notifiers
• How to use filters to sort and prioritize
• How to get newsletters automatically sent straight to a folder that you access twice weekly
• How to set up auto-responders to acknowledge and advise response time
• How to use filters, flags, colors, and sorting tools

Rule 9: Your Inbox Is Not a Storage Area

The inbox should be for collection only, just like your desk inbox. Messages should be deleted, actioned, or filed. Do you keep all your texts and phone messages? No! Be ruthless with deletions. You have only deleted enough when you, on occasion, have to ask people to resend their email.

Rule 10: Have a Night's Sleep before You Send a Complaint/Rebuff Email

For complex responses, complaints, rebuffs, and the like, draft the email and file in the drafts section of your email application overnight, as you may well have second thoughts. It is a good idea to send these draft emails to your mentor. Many a career has been dented by a poorly thought-out email written in anger.

Rule 11: Monkey-on-the-Back Emails

Many people are using the email system to pass their workload on to others. In many cases, people contact known experts and ask for their help without having done any research themselves. In other words, they are passing the monkey on their back to the expert.

My friend, an internationally recognized expert, advised me that the best way is to politely thank the sender for the email and then say, “Please call when convenient to discuss.” Based on his experience, this gets rid of 95 percent of the requests.