By Kathy Biddle. Quarter end is always looming and is usually a mad rush governed by strict deadlines. To prepare yourself for this inevitable workload, avoid saving equity compensation calculation work for the end of the quarter. Instead, create a monthly preparation and calculation workflow to avoid a paralyzing bottleneck.
A key way to create a smooth flow of information is to keep an open line of communication with cross-functional departments. Equity compensation management tasks span from Human Resources to the Legal to Finance. Take inventory of any key players at your company and schedule a regular monthly check-in. Even if you don’t need it every month, it will be a good reminder to cover any information or updates you need to share. This will help streamline the process of collecting the last minute information need in order to generate financial reports.
Gathering the data is half the battle, making sure its accurate is the other half. Bad data can lead to incorrect calculations – and the last thing you need at crunch time is to comb your database for accuracy. A best practice is to audit your database in advance. Take some time each week to look for missing valuation records, forfeiture rates, corporate tax rates or modifications. Set aside a recurring time slot on your calendar, so you never get too behind.
Another way to save precious quarter-end time is to conduct a regular review of accounting policies and methodologies. Set an annual reminder on your calendar to do this during a non-crunch period. Ensure that considerations like Black Scholes assumptions, forfeiture rates and estimated performance factors are still valid measures for your company. This will also help you to be prepared for your auditors ahead of time. You will be able to explain your numbers quickly and confidently – and maintain a clear understanding of the calculations and methodology throughout your accounting reports.
A major consideration in smoothing out your quarter end processes is to be on top of regulatory changes. Any regulatory changes will have a direct effect on your accounting reports, and in turn your company’s data accuracy. The Financial Accounting Standards Board website, fasb.org, is a thorough resource for changes in accounting policy. You can also subscribe to FASB Outlook, a quarterly newsletter designed to keep you informed about key FASB projects and activities.
The end of the quarter can bring on significant anxiety, but there are ways to alleviate some of the stress. Constantly look for ways to update your processes and improve procedures. Be sure to keep lines of communication open across departments to ensure smooth delivery of data and timely completion of accounting projects. Always be auditing, maintain clean data and make sure you’re aware in advance of changes in accounting standards.
Also, download Certent’s white paper, The Four Fundamentals of Financial Reporting for Equity Compensation, to gain additional best-practice recommendations that can dramatically ease the financial reporting challenges associated with equity comp.