How to build your own financial controller checklist

5 minute read: In this article I talk about my experiences of building checklists in the finance function, the mistakes I made and the lessons I learned so that you can build your own checklists using best practice from The Checklist Manifesto by Atul Gawande. 

Why I started using (re-using) checklists

When you complete your training in an accounting firm each audit follows a very prescriptive set of work programmes to ensure the accuracy and completeness of the work. The structure of a firm is usually very hierarchal with a senior audit team leader reviewing your work, the audit manager reviewing their work and the partner reviewing the overall file with the audit manager. All completed and signed off via a series of checklists. We tend to forget those series of checks and re-checks when we head out on our own to be the financial controller or finance manager in a commercial business. 

As discussed in what its like to work in a small business there are very unlikely to be any procedures or templates when you join a small business. With the business growing in complexity you will quickly start to feel overwhelmed with the number of steps and 'edge cases' that the organisation is creating as they continually experiment with new ways to acquire customers.

I experienced this first hand when I started in my first company. With the business growing extremely fast I needed a clear method not just to remember what was going on, but also to delegate work properly and to avoid overlooking and skipping certain tasks. When it came to delegating tasks I was constantly getting frustrated because they were not done to the same standard that I could do them myself, or worse, they evolved into completely different steps!  

The same problem happens across multiple industries not just in finance. Atul experienced this problem when he worked as a surgeon in the medical field. Despite surgeons being extremely knowledgeable and highly trained there were frequent, avoidable failures at the operating table with very serious consequences. People were dying. When reviews were done it was determined that although the knowledge existed, in the high pressure, time sensitive medical environment highly skilled and experienced surgeons were making mistakes. They were simply overlooking, forgetting or skipping basic steps. 

Atul wondered if there was a strategy to adopt to build on these experiences and to overcome this issue.       

The aviation industry provides the financial controller with the rationale. 

Anther industry which very early on saw the importance of checklists was the aviation industry. A great example which really brought home that impact to me was the story of the Flying Fortress and how checklists played a vital role in its development. This video talks through that event which I recommend you watch if you have time:  

The modern aviation industry now spends millions of dollars and thousands of hours developing checklists. Airplanes are now so complex that despite all the hours of training, when an error occurs it could be something that the pilot may not have experienced in a very long time and with a plane in trouble every second counts. As a result, the pilots immediately turn to their aviation checklists which are simple, brief, and practical. These checklists don't try to spell everything out, but provide concise reminders of critical steps for the pilot.

But checklists are limited on there own and I found that out myself when I started to use them.

My first (terrible!) results implementing checklists as a finance manager

When I first went about setting up checklists I launched into a very prescriptive, detailed task list that I insisted the team follow to the letter. One of the arguments for checklists is that the standardisation will increase baseline performance so I thought that by spelling it out everyone would be very clear on the steps needed.

Then, later in the month when I reviewed work I would notice the inevitable 'edge case' - the new customer onboarded, the change in terms with a supplier etc. When I raised these issues I was shocked by the responses. My team were applying the steps 'per rote' as per my instructions. Worse, they were applying an attitude of 'if its not on the list then its not my problem'. Far from making the process easier, checklists were reducing my teams awareness of new business situations. I had over-corrected and left no room for craft and judgement to be applied. When I read Atul's book I realised the mistake of having checklists alone:

The real lesson is that under conditions of true complexity - where knowledge exceeds that of any individual and unpredictability reigns - efforts to dictate every step from the centre will fail. People need room to act and adapt...For checklists to help achieve that balance they have to take two almost opposing forms. They supply a set of checks to ensure the stupid but critical stuff is not overlooked, and they supply another set of checks to ensure people talk and coordinate and accept responsibility while nonetheless being left the power to mange the nuances and unpredictabilities the best that they know how.

Dealing with Non-Routine Problems

In the book, Atul uses the examples from the building industry and how they get the right people together at the right moments to talk things over as a team rather than as individuals so that serious problems could be identified and averted. Later, he discusses how it works in professional kitchens:

People celebrate the technique and creativity of cooking. Chefs are personalities today, and their daring culinary exploits are what make the television cooking shows so popular. But as I saw at Rialto, it's discipline - uncelebrated and untelevised - that keeps the kitchen clicking. And sure enough, checklists were at the centre of that discipline.

First there was the recipe - the most basis checklist of all. Every dish had one. The recipes were typed out, put in clear plastic sleeves, and placed at each station. Adams was religious about her staff's using them. Even for her, she said, "following the recipe is essential to making food of consistent quality over time."...

I have also found it very effective for the team to have access to an 'Issues log'. Everyone on the team  even the wider non finance team - has access to fill in a form if they have found a problem or related finance issue.(Google / Microsoft form, dedicated email address or project management tool depending on the size of the business). This allows the finance team to log and track the issue - to determine if the issue is critical enough to deal with immediately, is required to be added to checklists or should be prioritised and added to process improvement work. 

...Tacked to the bulletin board beside the dessert station was what Adams called her Kitchen Notes - emails to the staff of her brief observations about the food. The most recent was from 12:50 the previous night. "Fritters - more herbs, more garlic..more punch," its said "Corn silk in corn! Creamed corn side on oval plates - not square!...

Because the finance function tends to be more routine in nature they have not traditionally been great at reacting to non-routine problems. In my experience, one department that has always lead the way in managing this work is the IT or tech team and developers have always had these type of work practices. If you want to implement the best practices for these meetings within your finance function talk to developers about their 'weekly stand-ups'!

...As in the construction world, however, not everything could be anticipated and reduced to a receipt. And so Admas, too, had developed a communication checklist to ensure people recognised, and dealt with, unexpected problems as a team. At five o'clock, half an hour before opening, the staff holds what she calls a "pow wow". everyone gathers in the kithen for a quick check to disucss unanticipated issues and concerns - the unpredictable...

Final Checks to Catch Issues

Finally, there is the pause point where a final review is completed before publishing the accounts (or sending out the food in Atul's case)

...Of course, this still couldn't guarantee everything would go right. There remains plenty of sources of uncertainty and imperfection: a soup might be plated too early and allowed to cool, a quail might have too little sauce, a stripped bass might come off the grill too dry. So Adams had one final check in place. Every plate had to be reviewed by either her or the sous chef before it left the kitchen for the dining room. They made sure the food looked the way it should, checked it against the order ticket, gave it a sniff or, were the clean spoon, maybe even a taste I counted the dishes as they went by. At least 5% percent were sent back...

Side note: As automation and AI become more and more mainstream and more simple tasks get automated I believe this is where the CFO, Financial Controller, and Finance Manager will become more important than ever. It is their experience, knowledge and nuance to 'smell' when something is not right in the steps prior to this and be able to step in to avoid errors and mistakes arising in reporting.  

Creating Really Basic Finance Checklists

Atul writes about two type of checklist.

• The Do-Confirm checklist is where team members perform their jobs from memory then stop and go through the checklist and confirm that they completed it correctly.
• With a READ-DO checklist, people carry out each task as they check it off, like the recipe earlier. For most finance tasks I recommend a READ-DO, with a pause point at the end.

So here are my top 11 tips for setting up a really basic repeating READ-DO checklist for finance tasks (you can download the basic template here). I often use this structure initially to get a feel for the work and structure the tasks. You can always upgrade/formalise this to specific checklist software once you are up and running. 

1. Start every task with an verb (Prepare, review, calculate etc)
2. Keep the checklist free from clutter.
3. Keep the font large enough to read and a simple format*
4. Place tasks in chronological order. (You can always reorder them or insert steps when more tasks are added)
5. Nest sub tasks by indenting them under the main task or linked in another checklist.
6. Include a simple check box to confirm that you have completed the task. **
7. Allocate each task to a team member so that they can clearly see what they need to do.
8. Use formulas to update time deadlines so that you can see what needs to be done by who and when.
9. Ensure a master control or 'pause point' when finalising the work done on the checklist to ensure that everything is good to go. 
10. Leave space in your task list to allow team members to raise concerns, edge cases, changes or steps to highlight for additional review & discussion during the review.
11. Review the checklists with the team regularly to see if there have been any items on your issue log that need to be included.

* Atul recommends Sans Serif.

**When it comes to excel/google sheets I simply have a column 'To Do, Done, N/A' for the month end routine in question. For old fashioned paper checklists each member of the team has a different colour pen, or a different sign off initial or equivalent mark.

Why modern checklist software is brilliant for finance functions

I still recommend starting with basic checklists, even for a short while to master the methodology and steps to creating great results. When you're ready and if the size of the business warrants it (I still use basic checklists with many businesses) you can upgrade your basic checklists to dedicated checklist software. Checklist software can add the following great benefits:

1. They are really easy to keep updated when processes change and usually have prior version histories, audit trails and reporting metrics against each checklist
2. User experiences are always better on dedicated task list software. They allow for easy editing, sharing and collaboration. They make it easier to win team members over and they also apply positive behaviour (who doesn't want the streamers, balloons and satisfying noises when a task is completed?)
3. They enable users to filter on just their tasks, ignoring what is not relevant to them and making their workload feel less cluttered and overwhelming.
4. They allow you to securely share certain aspects of your checklists with external parties. For example, share subtasks with suppliers and contractors to ensure that they follow your procedures and confirm their tasks directly within the workflow.  
5. They enable checklists to be easily augmented with videos, pictures and other links to make it easy for the user to follow tasks or retrieve the necessary files and documents without having to leave the process. 
6. They can provide dynamic links to other checklists and index and store items clearly for other team members.
7. You can build in more detailed standard operating procedures, and data collection from within the same platform.
8. They make it harder for users to skip steps and with data validation they ensure consistency for reporting.

Further Reading on Checklists

This is an abbreviated lesson on checklists and their importance. If you'd like to learn more, I suggest you read The Checklist Manifesto by Atul Gawande. Here is a book summary: