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Develop a scalable accrual process for the new leasing business

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Case Study #1

 

The Company has decided to create a new business to start leasing cars to drivers.  Currently there are no accrual processes to account for these new business’ expenses in the correct period. This is mainly due to the following:

 

  • The Company currently lacks a level of granularity in its budget.  FP&A works with the business owners to develop a total expected spend for some departments but this budget is not broken down to the account level.
  • The Company currently does not have a Budget vs Actual analysis.  The Accounting and FP&A team performs an actual month over month variance analysis for the Balance Sheet and P&L on business day 6 of close.
  • The current purchase order system is still in an immature state to place any reliance on the accuracy of its reporting. The Company has a highly decentralized procurement model.
  • Department and account coding on invoices and purchase orders have been consistently incorrect and require a great deal of review by Accounting and FP&A to ensure accuracy.
  • The current close period is six (6) business days. Accruals based off invoices are recorded by business day five (5). As a result, there are material invoices that are not recorded in the correct period.

 

Please create a presentation detailing how you would:

1) Develop a scalable accrual process for the new leasing business for month end close considering the above scenarios.
2) Develop an approach to create long-term scalable solutions for each of the scenarios above.

Case Study #2

 

The Company has 80+ accounting ledgers for its 100+ entities worldwide. Many of these entities are Local Support Entities (LSE) that use Cost Plus for funding operations. The Company is currently experiencing several instances of under-funded LSE’s due to expenses not being recorded from the prior period. Prior period expenses are used to determine how much the LSE will be reimbursed (e.g. funding) to support continual operations in the current period.

 

After investigating the under-funding issue, the Company noted that LSE expenses incurred are significantly below the Company’s consolidated materiality for month-end close accrual purposes. As a result, these non-material accruals are not recorded in the LSE’s books. These expenses, however, are material on a standalone basis for Cost Plus funding.

 

Please create a detail presentation on how you would develop a scalable process to address the LSE under-funding issue. Please keep in mind that the issues presented in Case Study #1 are also relevant at the corporate and LSE level. In addition, month-end close timeliness has priority over spending time to accrue for LSE funding as the team’s work capacity is already maxed out.

  Remember! This is just a sample.

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