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Reporting Periods: Why 13 Might Be Lucky

We in the finance & accounting field can be creatures of habit.  We get used to looking at things in terms of months.  This is how we are schooled and how most companies set up their books.  The problem is reporting on a monthly basis can make analyzing trends and making comparisons between periods difficult because we aren’t dealing with periods of equal length.  So let’s consider the 4-week accounting period – 13 in each year.

I started giving this thought in the past few weeks.  Having periods of equal length with four Mondays, four Tuesdays, four Wednesdays and so on can really be beneficial.  Restaurant chains and retail stores will often use this reporting structure because most holidays will fall in the same period every single year making comparisons more meaningful.  The benefits are even greater if your pay schedule is bi-weekly.  Just think – you may not need to do payroll accruals!!  There is also an advantage related to inventory as scheduling & planning counts becomes easier because they will always fall on the same day of the week.

Going to a 4-week reporting cycle isn’t without its challenges.  First, for those of you who noticed, 13 periods X 4 weeks X 7 days per week = 364 days.  We all know there are 365 days in a year.  So your year end will change by 1 day each year.  There are two ways to handle this:

  1. If you want to always have your periods start on a particular weekday, it would probably be wise to add one extra week to the fiscal year every 6 years to align it back with your “normal” fiscal year end.  An example of this calendar can be seen here:   13-period calendar starting on Sunday
  2. If you aren’t overly particular about the day the period starts on, you could assign the first day of the fiscal year to always be an extra day in Period 1.  You will also need to assign any leap days (Feb. 29) as an extra day in the period that Feb. 28th falls.  In this scenario, the same dates will always be in the same periods.  An example of this calendar can be seen here:  13-period calendar starting on Jan. 2

Here are some other things that might appear to be challenges:

  • Bank statements are usually done on a monthly basis but this can usually be overcome by asking your bank to cut off your statement dates according to your schedule.  And honestly, who isn’t using electronic downloads from their bank account anyway to do bank reconciliations?  This objection to the 4-week reporting cycle is not a show stopper.
  • Some expenses are billed on a monthly basis.  Handling this one does require a little bit of work on the part of the accounting staff but when you consider the potential benefits in reporting, it might be worthwhile.  Let’s take rent, for example.  Let’s say your rent for the year is $120,000.  When you receive your monthly bill for $10,000, code it to a prepaid account and expense $9,230.77 per period (1/13th of the yearly total).  By the end of the year, the entire amount will have been expensed equally amongst the periods and the prepaid account balance will be zero.
  • I know that some software packages like QuickBooks have their canned reports built on a monthly reporting schedule.  In QuickBooks, this is easily taken care of by creating memorized reports with the appropriate date ranges corresponding to the period.  There is probably a workaround in most systems if they don’t accommodate the 4-week reporting cycle.

Although using a 4-week reporting cycle may not be for every business, the above discussion will hopefully allow you to weigh the pros and cons and determine if it’s right for your company.

Financial Reports: Useful or Useless?

Finance & accounting departments are ultimately about reporting.  If you are a public company, there is the required reporting to the SEC and the shareholders.  And regardless of whether you are public or private, there are many other external reports that allow the business to meet its obligations to external stakeholders like banks.  But the focus of this post is on the internal reporting within every company.  This is the reporting that is hopefully adding value and helping to provide direction as the business drives towards its goals and objectives.  Unfortunately, all reports are not created equal and many fall far short of the value they were intended to create.

The problem with reports that don’t live up to their expectations is they are time wasters on two fronts — for finance & accounting who prepare the reports and for everyone else trying to decipher what information in the report is important (if any).  When this happens, people begin to question the value of not just the reports but of the finance & accounting group as a whole.  As financial professionals, we are expected to provide information that is valuable to decision-making; clear, concise & accurate in its presentation; and timely to the needs of the business.

Probably the biggest pain is the reports that have been around since the dawn of time.  They are usually the biggest drain on resources because of the way they are structured and where the information comes from.  These reports probably bear no resemblance to where the business is today and focuses on things that are no longer goals of the company.  But if you ask everyone if the report can be stopped, they drag out their pitchforks and want to lynch you for even suggesting it.  How can they possibly continue when the report has been a part of their business life for so long?  I remember one of my employees coming to me about a report like this and asked what they should do.  I looked at the report and, in my opinion, it really wasn’t a valuable report.  My advice — don’t do it for two weeks and see if anyone squawks.  Surprisingly (or not), not a single person noticed the report was missing!  The takeaway from this is every report should be reviewed with a critical eye on a regular basis to determine if it still adds value in the context of the business’ goals and objectives.  If it doesn’t, show it the door.

Equally important is reviewing reports to see if gains in efficiency can be made in preparing them.  Look for reports that contain the same information and see if they can be consolidated.  Determine if detail is really necessary or if the report users just want the summary.  Also, see how often a report is really needed.  If the report users only look at the information once a month before a scheduled meeting, why are you busting a gut getting it out weekly?  Ensuring that reporting is a value-added exercise requires good communications between finance and the rest of the business.  Understanding their needs and balancing it with what we can do given the resources we have can be a challenge.  But if the end result is better reporting leading to better decision-making, we’ve done our job well.