Accelerating the Close Cycle to Make Finance More Strategic

by John O'Rourke

4 ways technology and automation can help accelerate the close cycle.

©hanakaz/iStock/Getty Images Plus

No longer the mere number crunchers of yesterday, CFOs are emerging as central C-Suite figures playing an increasingly strategic role in business today. Beyond closing the books, actuals reporting and annual budgeting CFOs are now tasked with supporting real-time decisions that can set the direction and even impact the future of the company. This is reflected in a recent Accenture survey, where 77 percent of CFOs believe finance should be proactive and aligned in its operations alongside internal business partners across the wider enterprise ecosystem.

Yet many finance teams are still bogged down with fundamental processes for financial consolidation, account reconciliations and reporting. The month-end financial close, for example, takes 10 business days or longer for 25 percent of the companies responding in the APQC General Accounting Open Standards Benchmarking survey. Half a month to close out each month! The top 25 percent in the survey fared better, with 4.8 days or less, but that’s still nearly a week per month. The median in the survey was 6.4 days – nearly a third of the month.

If the finance team is spending anywhere from 25 percent to more than half of their time on the month-end close cycle, that leaves less time for analyzing the results, understanding key business trends, modeling M&As and forecasting future results. Worse, it detracts the CFO from more closely aligning to other lines of business and fully contributing to C-level decisions.

In fact, accelerating the financial close process is a top priority for many CFOs seeking to put more focus on providing better insights for business decisions. It’s not a matter of throwing more people at the challenge, but rather leveraging technologies that can streamline the process and allow the finance team to focus on more strategic projects.

While reporting and value-added analysis is the end goal, the bottleneck is actually in collecting and verifying the data from across multiple business divisions and locations. This is especially challenging for large enterprises that have multiple business entities in different geographic locations around the world. There are four areas where technology and automation can help accelerate the close cycle:

Collecting and Consolidating Financial Results – to report accurately, each business entity needs to provide their month-end results to the parent company. This has been a highly manual and laborious task, often managed via complex, multi-tab spreadsheets for each subsidiary or location. For companies with multiple GL/ERP systems, the process can include gathering, moving and mapping data with different charts of accounts, currencies, and accounting approaches Automating and unifying the process can result in significant time savings. Replacing manual spreadsheets and legacy applications with a modern process can shave hours, and in many cases even days off the period-end close cycle.

Another big challenge that can bog down the close process is intercompany reconciliations and eliminations.   In a global enterprise with many subsidiaries who do business with each other, or have complex ownership structures, matching intercompany transactions, reconciling and eliminating intercompany account balances can be time-consuming.

Automating and simplifying data collection, mapping and validation, intercompany eliminations, and financial consolidation streamlines the close process, improves the integrity of data and dramatically reduces human error. In fact, it could even help with finance team retention by letting employees focus on more strategic tasks that are not as tedious.

Account Reconciliations – the process of ensuring that all sets of records are correct and in agreement, is another task that can be tedious and time-consuming. This is another area where an organization can eliminate days from the month-end close cycle with automation. This shifts the finance team from mundane accounting tasks to focus more on analysis of the data. Automation can greatly improve data integrity and provide a single source of the financial truth, allowing everyone in the organization to work from the same numbers.

AFL, a global telecom manufacturer, was able to accelerate its quarterly finance close cycle by 75 percent by automating account reconciliations, aligning it with the financial consolidation process and replacing a standalone legacy application..

Reporting can be a challenging and time-consuming process in larger enterprises.  While closely-tied to the financial consolidation process, reporting requirements can span multiple internal and external stakeholders with different requirements including internal management reporting, board reporting, external financial and statutory reporting.  Automating the production and distribution of reports to management and external stakeholders can accelerate the delivery of accurate financial and operating results

Tax Provisioning– the process of determining income taxes across each entity in a complex enterprise operating in multiple countries, is another bottleneck. In fact, many companies are unable to perform tax provisioning on a monthly basis, doing it quarterly or even annually instead. Automating and aligning this process to financial reporting can help organizations improve efficiency and accuracy in tax provisioning, reporting and planning.   .

Guardian Industries, a global manufacturer, was able to move to monthly tax provisioning by automating the solution. In fact, the manufacturer slashed nearly a week off tax provision data collection with the new solution.

CFOs and the finance team are transforming from a largely accounting-focused role into a strategic resource that can provide insight and guidance for major business decisions that can affect short-term and long-term performance of the enterprise. To be successful, they need to spend less time on mechanics and create more time for value-added planning and analysis. By automating key processes, such as the finance close and reporting cycle, they can reclaim valuable time and become a more powerful asset for their company.

John O'Rourke is Vice President of Product Marketing at OneStream Software