Tips for Making Your Financial Close Count
Spend Matters welcomes a guest post from Peter Minck, vice president of business solutions at Redwood Software.
The financial close process has long been a strategic focus in every industry. It provides business leadership with accurate, detailed information to support sound decision-making and a strong market position. Central to the close is the record-to-report process. KPMG describes record-to-report as balancing cost and efficiency with “providing management with timely and accurate information to aid in the decision-making process.” A quality record-to-report cycle requires both speed and complete accuracy. To meet these two profoundly competitive challenges, organizations take decisive action. They work longer hours and add extra staff. They implement shared service centers to consolidate efforts. To avoid the heavy lifting, some firms outsource critical operations in the financial close. These solutions are not without their costs.
We recently surveyed 56 companies in the Global 1000 and found that more than 82 percent of them have high volumes of manual processes in their record-to-report cycle. As a result of all this manual activity, many close processes were undocumented or not regularly completed. This overwhelming reliance on manual tasks and undocumented effort exposes companies to risk and increases the overall cost of the financial close itself—no matter where or how the process happens.
At many companies, most of the time effort and scrutiny of the close process is sharply focused only on its final stages—”last mile of finance”—and then only on specific steps within it. Organizations use multiple ERP features that assist with consolidation, software packages that perform some reconciliations, and workflow monitors that provide checklists. However, spot automation like this at the very end of a profoundly corporate-wide activity—such as the financial close—can only offer so much. According to Kyle Chaney of Deloitte, “traditionally, most of the activities that take place during the Last Mile are manual and spreadsheet-driven.”
Filling in the space between spot solutions and selective automation with manual effort isn’t the answer. To get the speed, accuracy, and reliability required for a healthy record-to-report process, finance, and accounting groups need to go beyond the prepare-and-run steps of close tasks, or just running reports repeatedly during the “last mile” phase. Finance and accounting professionals know that, in reality, all of the processes in the close are a part of a huge chain of events that happen every day—not just at the period-end. To improve a process this entrenched and complex requires practical automation that goes beyond silos and point solutions.
On the market today, you can find a wide variety of technologies that claim to be solutions for the financial close process. Most offer up checklists, cockpits, graphs, dashboards, and other tools that give the finance group a list of what’s being done or completed. What’s not always clear at first is that the steps these tools document still require manual intervention to proceed. To-do lists don’t remedy swirling compromises in the record-to-report cycle. Manual inconsistencies can’t be resolved with spreadsheets, extra work, or even a new ERP system. For accuracy and speed at a cost that’s under control, the close requires financial process automation.
With process automation, the record-to-report cycle can be managed like a cross-functional project with parallel—not competing—requirements for success. It can work with all the speed, accuracy and reliability of a modern, automated factory. According to Giovanni Perone of PricewaterhouseCoopers, “leading finance teams have automated 70% more of their key controls than typical functions.”It’s clear that this leading strategy can make the financial close process count for any business.
Peter Minck has held executive financial management positions at Automatic Data Processing, The Rockefeller Group, Goldman Sachs, and Cohn Consulting Group, among others. He has more than 25 years of experience in financial consulting and management.