Companies pay specific attention to their time-to-close, and reducing this has been a key financial objective for years. However, is this the most useful indicator when looking at your close performance?
The common adage in terms of speed, quality, and cost states that you can only pick two. One Trintech customer example that highlights this can be seen in the case of a global communications technology provider. Before implementing Trintech, they set time-to-close as a key metric and made great strides in reducing it. However, this had an unintended negative impact on their quality.
They found that 30 days after they’d closed the books, issues would arise around unsubstantiated figures and possible misstatements due to rushed work and a lack of visibility into the process and controls. However, I’m pleased to say that in terms of the close process there is another way.
The answer? What they did was deploy software that automated the process and provided insights into exactly where and why the misstatements were happening. By strengthening the control framework, they could drill down on any regional issues and ensure accurate data, while maintaining their time-to-close targets. What this really means is that by taking care of the Quality of the Close, the time-to-close took care of itself.
Quality vs Costs
Improving quality can also have a positive impact on the other variable: Cost. Recent studies from Hackett have shown that best in class companies are managing to have their cake and eat it too, reducing time and ensuring quality while reducing costs overall. Their research¹ shows that best in class performers have:
• A 40% reduction in the number of days required to close
• A 52% reduction in process costs as a percentage of revenue
• A 63% reduction in FTEs per billion dollars of revenue
While we would recommend that companies continue to review their time-to-close, we also believe that this should be as part of an overall improvement strategy and not a standalone metric. By doing this you really can buck the trend and deliver speed, quality and reduced costs across the close process.
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¹ Leaders of Account-to-Report: Key Performance Levels and Methods