Guide to Automating Financial Close Processes

Blog post

The Office of Finance faced many challenges as they transitioned to remote work while navigating virtual closes. As a result, the need for financial automation became more apparent as F&A teams continued to utilize manual approaches to the financial close.

“A lack of automation is recognized as the largest contributing factor to an inefficient financial close process — and yet almost half of the organizations reported they are only able to export spreadsheets from their ERP and have not started a true automation journey.” – 2021 Global Financial Close Benchmark Report

As organizations begin to embark on the financial automation journey to optimize their close processes, knowing where to start can be overwhelming. Read these key questions to learn why implementing financial process automation is crucial to the success of your organization.

Why Automate Finance Processes?

Technology has no doubt changed the landscape for businesses as they mature. With accelerated growth comes the need to reevaluate business operations and workflows; processes that were previously doable at a smaller scale are now infeasible due to organizational expansion and complex workflows. To keep up the pace, businesses have implemented process automation to complete a repeatable series of tasks for any department.

As organizations grow and mature, the financial close process also becomes more cumbersome and complex. Automating financial close processes provides a myriad of benefits for any organization:

  1. Quality and Consistency: Automation ensures that every action is performed identically, reducing the potential for errors.
  2. Time Savings: Automation reduces the number of tasks teams have to perform manually, freeing up time to perform more strategic, value-added tasks.
  3. Improved Efficiency: Automation reduces the time it takes to perform a task, cuts down on errors, and standardizes best practices.
  4. Enhanced Controls: Automation minimizes compliance risk because every action executed by the software is logged and auditable.
  5. Reduced Costs: Automation allows teams to accomplish more using fewer resources.
  6. Scalability: Automation eliminates manual processes that won’t reliably scale as the business grows.

Implementing process automation unlocks the potential for F&A teams and empowers them to transition to a true business advisor.

Which Close Processes Can Be Truly Automated?

The traditional finance and accounting role typically focuses on repetitively recording figures, matching those transactions, reconciling accounts, and preparing financial reports. While these are all necessary tasks for organizations, F&A teams often dedicate the majority of their time to these processes with manual methods, leaving very little time to focus on strategic, value-added initiatives.

In fact, the 2021 Global Financial Close Benchmark Report revealed that as many as 78% of respondents reported that they still do not have mature automation in place for their financial close, with 45% of respondents specifying that their automation efforts extend to exporting spreadsheets from their ERP system.

Instead of continuing with legacy tools and status quo processes, F&A teams can unlock opportunities for their organization by automating and simplifying most of their financial close:

Account Reconciliations

Reconciliations take up the bulk of the financial close, meaning they present a vast opportunity for financial automation. Financial automation software takes away the tedious, repetitive work of reconciling via spreadsheets and endless piles of paper.

Guide to Automating Financial Close Processes | Account Reconciliations | Three illustrated individuals gather around a computer monitor to glance at accounting financial figures

An automated account reconciliation tool automatically reconciles those low-risk, non-key accounts and flags any inconsistencies or discrepancies. Rather than being bogged down in manual, tedious work, accountants can refocus their efforts on highlighted exceptions and identify the core issues that created the exception. Over time, accounting teams can work to enhance the organizational process by decreasing exceptions over time. Continuous reconciliation and improvement lead to fewer errors and enhanced controls.

Transaction Matching

Similar to account reconciliation, transaction matching takes up a large portion of the financial close. Accountants record transactions on a daily basis in order to accurately document the organization’s finances. As organizations grow and expand, the high-volume transactions that flow in and out of the business often pile up month after month, creating a lot of manual work for accountants.

With an automated matching solution in place, F&A teams can establish custom matching rules and procedures, effectively streamlining and simplifying the overall process. Matching transactions with bank statements, credit card statements, and other external sources happen in a fraction of the time that paper-based or spreadsheet processes take. Your team can then spend more time on the unmatched transaction exceptions, improving the accuracy and reliability of your close.

Document & Task Centralization

The financial close is a complex, intertwined web of key stakeholders. Finance and accounting teams collaborate with managers, C-suite executives, and other departments in order to carry out the financial close. Constant communication and collaboration are necessities in order to remain up to date on the close status. Organizations often resort to using Sharepoint sites, file folders, status meetings, and endless emails just to keep informed on who’s doing what. Having a disorganized system for storing documents and outlining tasks leads to chaos and confusion for everyone involved.

Instead of struggling to get updates on the close, organizations can minimize the constant back-and-forth by implementing a finance task management solution. Having a single-view dashboard of tasks enhances close visibility and allows for easy monitoring throughout the entire process. By centralizing detailed task lists and controls, everyone on the finance team knows what needs to be done every step of the way. With an activity log incorporated, F&A teams can effectively prepare for financial reporting and audits. 

ERP Data Integration

Enterprise resource planning (ERP) systems are the main staple for most organizations. They are implemented to effectively manage day-to-day operations, ranging from GL data to supply chain management. Accountants rely on ERP systems to perform reconciliations, while finance teams utilize this data to consolidate, plan, and forecast.

While an essential software solution, ERP systems are not designed to automate financial close processes. As a result, accountants export their GL data onto spreadsheets only to manually complete the close outside of the ERP landscape. Without a central solution in place, finance teams are struggling to reconcile and match balances in a timely manner, essentially leading to an increase in the risk of reporting errors.

Guide to Automating Financial Close Processes | ERP Data Integration | Two individuals analyze a series of numbers, figures, graphs funnel into computer

Rather than manually exporting data from ERP instances, organizations can automatically pull data from ERP systems and import them into financial automation software with the help of ERP connectors. Pre-built connectors drastically reduce the cost, time, and risk associated with data integration by eliminating both the needless manual processing and the reliance on internal IT teams by supporting all instances of ERPS and GL systems for complete visibility across all business units and geographies. In addition, ERP connectors eliminate the need to create in-house custom code for data migration, further reducing the reliance on IT teams.

With the knowledge that automation is necessary to improve the efficiency of the financial close, the next step is to begin the journey by automating key close processes. By implementing a best-in-class solution that encompasses all the work that is performed by accounting professionals on a single unified platform, organizations can maintain complete visibility into the workflow in order to identify bottlenecks and maximize the efficiency gains that an automated solution provides.

Written by: Alex Clem