From crisis to control: Full command of financial close processes and performance

by Theresa Clark

Processes and Goals

The financial close process is chaotic: a recurring managed crisis, dependent largely on the controller or close manager, who attempts to contain the chaos within tight deadlines.

The close manager has little advance warning of bottlenecks or issues, and it’s difficult to get a detailed view of the status of completed tasks. Yet the financial team rises above the challenges, allocating as many staff and overtime as required to hit targets for handoff to the reporting process.

Nearly every company has defined goals for improvement. Speed and efficiency are high on the list: faster close times become increasingly important as reporting requirements increase and deadlines decrease; companies must reduce errors, risk and costs. These companies seek more strategic involvement from the finance team on company initiatives, including leadership in higher-level and higher-value financial governance roles.

Challenges and Issues

But many companies are not achieving their improvement goals. It may be time to change the way we view financial close. Your financial close processes are as important as the processes that result in the products and services you deliver.

Financial close is a recurring process, with known input sources and pre-defined outputs, as much a production environment as a manufacturing line. Nearly every industry with similar recurring processes has deployed technology to achieve efficiency, quality, repeatability, and the capture of performance metrics.

Yet that same systematic automation is often lacking in today’s close, which is still highly-reliant on manual work to perform the necessary tasks. No matter how skilled your craftspeople, the workshop will reach a performance threshold.

Also missing is a means to capture performance metrics, resulting in limited visibility to detailed status and performance. Measurements that could be used after the close to improve the process are rarely available. Attempts at process improvement are based on guesswork.

An uncertain economy has increased the importance of finance. More analysis and a strategic approach is needed to better react to downswings without restricting the ability to profit from upswings. Regulations are also increasing, leading to increased scrutiny on the financial close as a source of compliance information.

 “Controls” vs. “Control”

In order to achieve strategic goals of increased efficiency, and take a higher-level role in governance, a strong tactical foundation of control is needed.

“Control” is different from “controls.” Finance typically focuses on managing, enforcing, and complying with internal and external controls: internal rules, formulas, polices and procedures; external regulatory requirements for transparency and risk management. The emphasis is on “what”—providing the right output—with secondary consideration of “how,” mostly to ensure consistency of the output.

“Control” goes beyond these “controls.” Control means that you are in command of your finance operations: able to define proactive plans, and set expectations for performance prior to the start of each period. During and after the close process, information is captured to provide situational awareness, informing your decisions.

Automation

Automating the financial close brings all components into a single system. This automated system becomes the new “hub” of the close, managing data, policies, processes, tasks, collaboration and communication. This automated system becomes the production platform for the entire close process, delivering three key attributes needed for improved performance: process control, performance control and management, and self-documentation.

Process Control

All close tasks should be managed within an automated system, with associated due dates, dependencies and descriptions. These tasks can be assigned across the finance team, regardless of location.

With the automated system, the close manager is freed from the role of hands-on “traffic coordinator,” gaining detailed visibility into the status of the close. All communication is managed through the system, enabling staff collaboration. Issues can be flagged early, clearly showing potential impact on other tasks. Overdue tasks are automatically escalated, eliminating the need to chase missing information.

Data validation rules reduce errors and troubleshooting. The system streamlines the entire close, to help achieve higher efficiency, reducing the amount of manual effort. Automation is integrated upstream—with transaction and account reconciliation—and downstream—with financial reporting.

Performance Control and Measurement

The benefits of process control improve an active financial close. To achieve true control over performance, information on close performance is needed.

Metrics are critical to achieving ongoing performance improvements, and modifying your financial close for optimum results. Changes to accounts, cost centers, policies, organization structure and regulations significantly impact the close process. You need to have information that leads to insight: Where are you experiencing bottlenecks? Can steps be eliminated? What adjustments to timeline or workflow are required?

Benchmarks:

KPIs:

Real Time-Documentation

For process control, real-time documentation embeds and synchronizes your policies with your process, ensuring that tasks match policies so staff have a single source for every task.

Detailed instructions, attachments, notes, communications, and review procedures accompany every task in the close. While process automation ensures tasks are completed according to plan, real-time documentation automatically captures supporting information, documenting compliance for later review.

Real-time documentation enables performance control. Measurements are captured automatically, as part of the close.

Benefits of Financial Close Automation

Automation can transform your financial close process from chaos to control, from a tactical obligation to a foundation for strategic financial decisions. Significant quantitative and qualitative benefits are realized through an automated system that serves as a platform for the efficient production of financial information.