How to Manage the Complexity of the Financial Close Process
The Current Close Process
During the financial close process, companies face a large number of labor-intensive tasks that must be completed free of error—the quantity of which can number in the hundreds, and even thousands for very large organizations.
The variety of tasks required to handle the financial close process effectively can vary from obtaining the wet signatures of dozens of people throughout the organization to managing complex processes and calculations, such as pension accrual. Each company’s task list is unique to their business size, geographies, legal structure and more, which makes it difficult for any one person to know exactly what’s required.
Each close period, thousands of hours are spent manually creating lists, checking off completed tasks and preparing documentation to overcome the complexity and avoid the risk of a material misstatement. Misstatements that can, and do, cost companies millions in fines and investor confidence.
And, to make matters worse, as these companies grow, the amount of time and effort required to complete the period end close process grows in tandem, further increasing their financial risk.
What Causes the Complexity of the Close Process?
However, no matter what your company needs to close effectively and efficiently, they all have a commonality – there’s a distinct lack of visibility into the progress and completion status of your tasks.
Primarily, these issues stem from a reliance on manual processes. Error-prone, inefficient tools and approaches such as:
- Error-ridden spreadsheets
- Confusing email approval chains
- Tasks handled within and outside the ERP
- Written lists of tasks and their dates of completion that have to be updated in-person
- Daily meetings with global controllers for status updates
Without a centralized solution for tracking your team’s progress, there is little to no insight into problems and delays, and an overall risk to the reliability of your financial statements during and after your financial close.
Where to Go From Here
By automating your close management, from the task list all the way through how journal entries are prepared and posted, you can provide a reliable and repeatable close process that reduces both time to close and financial risk.
Automating your close process offers:
- Visibility into areas for process optimization
- Reduction in time to complete and monitor close tasks
- Reduction in time to prepare for a close
- Reduction in write-offs
- Risk mitigation
- Identification of bottlenecks in the workflow
To safely continue growing as an organization, your office of finance must be able to not only remove all inefficiencies, especially those that increase risk in the financial statement but increase visibility into all bottlenecks within your process.
To learn more about how to reduce financial risk while streamlining the financial close process, check out our eBook How to Effectively Handle Close Management During Your Period End.
Written by: Caleb Walter