Ask a finance team how quickly they can pull off closing the books, and you’ll likely get some groans in response. Chances are they want to be faster but something—or many things—are clogging up the works. Inefficiencies have crept up along with trails of approvals and sloppy systems that have not kept up with the times. Errors and frustrations abound.
The result: a financial close that lasts for weeks and makes everyone involved sweat from forehead to chin until it’s over. And even then, no one’s happy. “Outdated and inaccurate financial information can lead to bad decision-making,” warned RoseRyan Senior Consultant Susan Wong during a recent Proformative webinar with Intacct Principal Sales Engineer Linda Pinion.
Both speakers offered ways companies can improve and accelerate the close process to get up-to-date, accurate information flowing, to feed the need to make smart decisions and provide the kind of real-time data craved by senior leaders.
There’s another sweet effect too: an improved close can free up the finance function, giving the team time to assist on other meaty matters, like analysis, strategy and planning. A faster, better close sets up the finance organization to be more efficient and responsive to the changing tides of business, according to Wong.
To see what’s mucking up the close, companies need to take an eagle-eye view of the key pieces involved. “If you have the right people, processes and systems in place, it will help you get closer to realizing the dream of the daily close,” Wong said. Below are just a few of the tips Wong and Pinion offered during the webinar.
Focus on the folks
“Your financial close is only as good as your people,” Wong said. “It sounds like a commercial, but it’s true. It’s all about having the right talent.” Is everyone involved in their own world? Rein them in by establishing well-defined roles and responsibilities. “Each participant should know exactly what needs to be done and when,” Wong said.
Track the close cycle time and errors that occur as part of the team’s KPIs to incentivize employees to keep learning and improving, she added. A backup plan is another smart move; by cross-training everyone and having contingencies if someone leaves or gets sick, the process won’t get stuck on just one person and will be more likely to run smoothly.
Step up the processes
Is the word “process” laughable when it comes to getting a close done at your company? Wong said most companies have informal processes that are not documented—and risk getting forgotten if someone leaves the organization. Documented, formalized processes will not only help the exercise of closing but can lead to satisfied auditors who are looking for consistency.
Have a financial close calendar accessible to everyone so they can plan around the dates. And have a checklist that includes all closing activities, such as updating depreciation, getting the inventory count and reconciling bank statements.
Review the systems
Is the company stuck in its Excel ways? Wong loves Excel as much as anyone in the finance and accounting world, especially as an analytical tool, but for accounting purposes, it can slow things down. Some companies are stuck with manually entering the same data into multiple spreadsheets—and risking mistakes with each entry. Others are still matching invoices and purchase orders by hand. Automation can quicken the pace and improve accuracy. “We know from our talks with CFOs that this is number-one on their list,” Pinion said. “They want to be able to streamline and automate processes within their organization.”
Automation can turn companies that have a vague idea of how they’re doing in the moment into a real-time data machine. “Visibility is in my opinion the key to accountability,” Pinion said. “If you’re responsible and you need to be accountable for these closings and these reports and documents you’re preparing, one of the first things you need is visibility to that information.”
Wong said most companies should take less than five days to close, and some may need more time if they need to consolidate. Sound like an out-of-reach figure for your company? Keep in mind that finding and resolving issues as the business trucks along with its daily transactions should occur outside of the close. Could the one-day close ever become a reality? Not at the moment for most companies, but the help of new technologies and streamlined processes could get them closer to seeing it happen at some point.
Even large businesses, organizations rife with complexities and teams that are mired in unwieldy spreadsheets, can get to where they need to be—an accelerated and smooth process. The fact is it is an ongoing process, with room to improve month over month. Wong suggested doing regular reviews and looking for ways to improve at every turn. “Track accomplishments and setbacks during the close,” she said. “We can all learn from our accomplishments and mistakes.”
With higher visibility, the finance team can provide senior leaders with more reliable metrics that they can use to pull the trigger on smart decisions. And that should mean less sweating all around.
Did you miss the webinar? Click here to watch Realizing the Dream: The Daily Financial Close Is Becoming Reality.