2 minutes
The approach compares account balances across periods and yields great insight into how a business is doing.
Sponsored by SkyStem
For many businesses, finding ways to improve the month-end close process can make a big difference in saving time and money and improving efficiency in other areas of your accounting department. Here’s why incorporating a balance sheet flux analysis should be a key activity during your close.
What’s Flux Analysis?
The balance sheet flux analysis is an approach used by businesses to compare account balances across certain periods to provide insight into how a company is doing. It can be a powerful tool for accountants who want to support the month-end close process.
Generally, accountants will compare balance sheet accounts over time, whether that’s monthly, quarterly or annually. Thresholds will be set based on percentages or amounts on an account-by-account basis. Once the exercise is run, traditionally in Excel, accounts where the variance over time exceeded management’s thresholds will warrant more investigation and research to validate the accuracy of the balance.
How Can Flux Analysis Be Helpful?
A company’s financials are a critical indicator of its overall health, which is why flux analysis is so useful for CFOs, accountants and business leaders alike. The downside is that it can be a time-consuming procedure to complete with regularity.
That is why you might want to use a more sophisticated tool than Excel that can perform the balance sheet flux analysis for you, especially if your team is strapped for time during the close. Having automated actions that can continually compare period-over-period variances, mark the accounts that require further documentation and enable a digital workflow through completion can provide valuable assistance to the accounting team close.
A Tip for Successful Flux Analysis
It’s important for a credit union accounting team that’s performing the flux analysis to select for consideration a variety of thresholds based on a combination of account risk, account balance and account volatility. The threshold selection exercise is usually done in partnership with operational and finance leaders and with the guidance of internal audit. Setting appropriate thresholds ensures that team members do not spend too much time chasing down immaterial fluctuations at the cost of neglecting larger fluctuations for any given period.
Go For Efficiency in Flux Analysis
The modern business landscape requires a constant effort to handle day-to-day operations in the most efficient way possible so that resources can be made available to seize on opportunities big and small in the marketplace.
Ally Mason is a marketing specialist at CUES Supplier member SkyStem, a month-end close SaaS product for accounting teams that helps them close the books with ease and confidence—and without drowning the team in administrative and compliance work each month.
