Closing speed is one of the most common measures of the finance team’s merit. CFOs are often grilled (or praised) for the number of days it takes their department to complete financial statements after each month’s end.
A lot is riding on those reports. In addition to expectations from senior executives – who rely on timely, accurate monthly statements to make corporate decisions – there can also be external pressures from key stakeholders and industry regulators.
Finance needs to have an effective, efficient close-to-report (C2R) cycle. Yet for many companies, F&A is plagued by a long list of pain points:
Multiple, nonstandard or overly complex charts
Unclear, conflicting internal and external financial reports (often delivered late, and created in spreadsheets, necessitating more manual work)
Disparate business and financial systems
Limited capacity or ability to report operational metrics or KPIs
The result is a chaotic close process that exceeds the five-day industry benchmark, fails to deliver adequate value and makes it impossible to complete routine F&A activity during month’s end.
Closing: Time for a New Approach
Companies struggling with these issues need to take immediate action to improve both the speed and quality of their close. Here are five tips:
Get everyone on the same page. Publish a monthly closing calendar that outlines required information, processing deadlines and system restrictions. Make sure all accounting personnel receive the calendar – and that they understand that the deadlines are non-negotiable. You should also assign clear roles and responsibilities according to skill level. This will reduce work duplication and ensure that each job is carried out by staff with the appropriate training.
Remove manual or redundant processes. Too many companies lose time by having employees needlessly pore over spreadsheets. Manual work slows things down. Review your closing process and identify all manual reports that could be generated automatically. Then remove all duplicate work, or low-value cutting and pasting between systems, from the Close-to-Report equation. With the grunt work out of the way, finance professionals can focus on more valuable tasks, like trend analysis.
Streamline account reconciliation. In an ideal world, businesses would reconcile all accounts before close. In the real world, a significant portion of staff time during monthly close is spent on reconciliations. F&A departments should develop a consistent approach for account reconciliations that will allow staff sufficient time to identify errors and prevent misstatements.
Restrict system access. At certain points during the closing process, it’s necessary to restrict system access to ensure data integrity. Your monthly closing calendar should account for time-sensitive processes, temporarily restricting access at specified periods to allow for improved system performance.
Adhere to the schedule. A closing calendar isn’t much good if personnel don’t stick to it. The monthly closing process affects corporate locations around the world; if one branch starts to lag, the impact will be widespread. The best way to establish protocol and maintain consistency from one month to the next is to close the books as scheduled – throughout the entire organization.