The financial close process is typically made up of a repeatable series of activities, performed in a specific sequence, by specific people, and by specific due dates. It sounds straightforward, but for some organizations, this process becomes chaotic due to late adjustments, confusing email chains of approval and lack of document standardization.
These bottlenecks slow down your financial close process, wasting valuable time through rework and can cost your company money. So, what are the 5 most common bottlenecks faced in the financial close process?
Rework typically occurs when an individual completes a task out of sequence. This is usually caused by poor visibility into the workflow process, since an individual may be unaware that a previous task was incomplete. We all know how frustrating it can be to spend time reconciling an account and then repeating that task when the numbers change. More importantly, rework delays the entire financial close process and generates excess work for your team.
During the financial close process, numerous high-priority tasks demand your undivided attention. However, staying focused can be difficult in an environment of continuous interruptions caused by people looking for status updated. Without an optimized Record to Report solution to monitor task completion, the performer ends up spending valuable time updating their colleagues and answering questions, rather than performing the task at hand. If a number of individuals on a team are experiencing these interruptions, the financial close process is probably taking longer than necessary.
A lack of standardization and consistency across like-kind activities creates excess work for reviewers and approvers, since they must waste time figuring out how an individual performer has set-up their documentation. It also becomes difficult and time-consuming for colleagues to fill-in during an absence, as they are unfamiliar with the performer’s layout. This bottleneck gets even more difficult to rectify when multiple users and departments rely on different processes and templates, and can significantly affect both the accuracy and timeliness of the financial close.
Most departments believe that they understand the activities used in their financial close process and that all steps are necessary. However, the value of specific scheduled tasks for the close process may often be overestimated, and you may be wasting valuable time and resources on unnecessary activities.
Exceptions often occur during the financial close, but managing them effectively can greatly impact your reporting accuracy and timeliness. Taking our reconciliations as an example, if we see something that is outstanding, we need to find out why. Are we expecting it to be there? Is it a timing difference that is reasonable? Or, is it unexpected and something that is an error that needs correcting? When people are managing this process manually, these are the questions that they don’t have the answers to. Even if they do find an exception, they don’t have the time or resources available to investigate it effectively. The issue is that people are spending too much time on data management and matching that they have little to no time to process the exceptions, leaving them to face the same dilemma in the next period.
To find out how innovative and risk-intelligent Record to Report technology can help you overcome these bottlenecks and improve your financial close process, please view our webinar recording or download our Record to Report Insights Piece, “Shatter the Bottlenecks – Enjoy a Simplified Close.”