Tools
Flux thresholds: how many accounts flag at each setting
Paste two periods of balances. For every pair of dollar and percentage thresholds, see how many accounts you'd have to explain, how much movement you'd leave unflagged, and the largest account that would slip through.
Most threshold advice is a rule of thumb. This shows what a rule would actually have done to your accounts, so you can pick one you can work through in the time you have and still defend what it leaves out.
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Use a close that's already finished. Pick the setting on last month's or last quarter's balances, write it down, then apply it unchanged to the close you're working on. Choosing a threshold after you've seen this month's movements is just tuning the queue to a comfortable size, and a reviewer will see it that way.
Two periods of balances
One row per account, tab or comma separated, copied straight from Excel: account (number, name or both), prior balance, current balance. The last two columns are read as the balances. A header row is fine. Amounts in US format; credits can be negative or in parentheses. For the income statement, use monthly activity, not year to date.
How an account is flagged
Movement is the current balance minus the prior one. An account is flagged when its movement, in either direction, is more than the dollar threshold and more than the percentage threshold, where the percentage is the movement divided by the prior balance. An account sitting exactly on a threshold isn't flagged. An account with no prior balance that now has one passes the percentage test, since any change from zero is an infinite percentage. An account that didn't move is never flagged.
That's the same rule as the free flux template, so a setting you pick here behaves the same way there.
Both, or either
| Flag when | What it does | Watch for |
|---|---|---|
| Both are exceeded | A large balance drifting a small percentage doesn't flag, and neither does a small account swinging wildly. The queue stays short and every item on it is both big and unusual. | A large movement on a large balance can slip under the percentage. Check the largest unflagged movement. |
| Either is exceeded | Anything big flags, and anything unusual flags. Nothing large gets through on a technicality. | Small accounts with big percentage swings fill the queue, and here every brand-new account flags, however small. The CloseOps Flux & Variance System ($79) flags on either. |
Reading the grid
Each cell is one setting. The big number is how many accounts you'd explain. Under it is the movement left unflagged: the total of the absolute changes on every account that moved but didn't flag. Click a cell for the detail: the accounts flagged, and the ten largest movements left out, each with the reason it was left out.
The left-out list is the useful part. A setting looks fine as a count, and looks different once you see that a $40,000 swing in accrued expenses sits under it. If you'd want to explain an account on that list anyway, the setting is too loose for this entity. If the flagged list is longer than you could explain well in the time the close allows, it's too tight, or the accounts need grouping.
The worked example is the September close from the flux analysis practice case. At more than $10,000 and more than 10%, it flags the same 15 accounts the case's answer key lists.
Balance sheet and income statement
If you use different thresholds for the balance sheet and the income statement, paste each one separately. Paste income statement accounts as the month's activity, not year to date; otherwise every income and expense account looks like it grew. If you paste a whole trial balance and the balances don't net to zero, the tool says so, because an account is probably missing.
What it doesn't do
It doesn't tell you what's material, and it doesn't pick a setting. That's a judgment about your entity, your reviewer and your risk, and it belongs in your close documentation with a name and a date on it. The "copy this setting as a note" button gives you that line with blanks for both.
It also only measures size. Some exceptions a size threshold can't see: an account that should have moved and didn't (see flat accounts), a sign flip too small to clear the dollar line, or a reclass that nets to nothing at the account level.
Once the setting is written down, the free flux template applies it every month and flags what needs explaining. To watch a full review run on a synthetic company first, try the flux analysis demo.
Related: what flux analysis is; balance sheet flux analysis; why the unexplained amount should be judged in dollars.
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