The Power of the Checklist: Gaining Control of the Financial Close
Ten years ago, the world was captivated by the scenes on TV of a plane in the Hudson River as passengers stood on the wings waiting to be rescued. Despite the loss of both engines shortly after takeoff, all the passengers and crew were saved because of the quick actions of Captain Chesley “Sully” Sullenberger who landed the plane in the river.
One of the first things Captain Sully asked his co-pilot to do upon the loss of thrust in both engines was pull out the checklist. He credits teamwork and adherence to protocol, not his skill flying the plane, for saving lives.
The story of US Airways Flight 1549 is a brilliant example of the power of the checklist. It has become an invaluable tool, as the volume and complexity of knowledge grows.
People use checklists for all sorts of things, from the simple honey-do list of chores around the house to tracking the progress of long-term projects. Despite better technology, training and specialization, people miss stuff and mistakes are routinely made. We’re human after all, and a lot of our work remains manual.
Checklists help break down complicated procedures into bite-sized pieces. Small goals are specific, measurable and attainable and help you stay motivated.
Improvement Through Checklists
While pilots have used checklists for years, other professions are just beginning to learn how useful checklists can be in navigating complex procedures. Atul Gawande, a surgeon at Harvard Medical School, and a team of researchers studied if surgeons might perform better with checklists in operating rooms. The list had some basic reminders, such as confirming that blood and antibiotics were on hand and making sure everyone in the room knew each other by name.
They tested the safety checklist at eight hospitals and found some striking results: The average number of complications and deaths dipped by 35 percent. Based on Gawande’s work, The World Health Organized has devised a simple surgical checklist that has been adopted in more than 20 countries as the standard of care.
Gawande told NPR: “Our great struggle in medicine these days is not just with ignorance and uncertainty. It’s also with complexity: How much you have to make sure you have in your head and think about. There are a thousand ways things can go wrong.”
He compiled the story of the surgical checklist and others in a best-selling book: “The Checklist Manifesto: How to Get Things Right.”
Accountants Love Checklists
Accountants are all too-familiar with the checklist. They are not dealing with life-or-death situations, but they must pay close attention to details and be accurate. The work is filled with repetitive and time-consuming routines, such as financial reporting. It’s easy to get distracted and forget one or more of the required steps. In the business world, financial reporting is a constant challenge. Internal and external stakeholders want financial statements that are relevant and reliable. And they must be transparent — that is, financial statements must permit stakeholders to see clearly what’s under the surface and what risks they may face.
The financial close is the mother of all to-do lists. To produce high-quality financial reporting, tasks, procedures and deadlines have to be clearly organized, compiled and checked off along the way.
However, each professional on your team probably keeps his or her own financial close checklist on the desktop, and a master version may even be printed out by a manager who confirms completion at the end of each day. The scattering of knowledge leads to inefficiencies. You can better manage everyone’s time by doing things like sharing reconciliation templates, clearly outlining all procedures, and creating detailed priority lists for the entire team.
By doing so, all of the requirements are immediately available, ready for the preparer to reference, follow and tick off as each task is performed. If any users are not satisfied with the requirements or supporting documents, they are free to point out weaknesses and suggest improvements.
For more information on how to gain control of your financial close process, we recommend our eBook: Eliminate the Manual Madness from Your Financial Close Process.