While the productivity demand for finance and accounting teams has always been high, after the pandemic of 2020 began, that demand has only increased. This can leave finance teams faced with the difficult challenge of performing more tasks within their virtual close process with less resources, especially due to the hiring freeze many organizations find themselves implementing. It’s more important now than ever that companies have strong financial processes and controls in place to mitigate their potential risks.

Here are four tips to help organizations ensure they have a strong control framework in place, whether they are still working in a virtual environment or beginning a shift back to a corporate office setting.

Establish Clear Governance Policies

Communication within any work environment is key. One of the key differences between in-office and virtual work environments is that, in a virtual close, an accountant can’t walk over to another team member’s desk and ask question. This means you now need to educate employees on how to effectively match their message with the appropriate communication channel. When should email be used versus a videoconference call or sending an IM?

Management should also work to set the pace and tone for the new work environment. Many companies did this at the beginning of the work-from-home environment and, as global conditions change, they may have to do it again depending on their corporate policies around a return to the office. It is important to hold a meeting to outline changes and set expectations for the upcoming close process, as well as distribute a close calendar that clearly highlights any changes to tasks and deadlines. 

Test Control Effectiveness

Throughout the virtual close process, organizations need to re-evaluate controls and determine their potential for ineffectiveness. Factors that might impact the effectiveness of your controls could be a lack of data, inability to execute control procedures, employee absences due to illness or illness of a family member, changes in access rights and technology breakdowns.

As new challenges arise, management review and monitoring activity might be put on hold. However, it is important that finance and accounting teams give special consideration to evaluating their controls. A lack of information or resources might impede controls from functioning as designed. If it is determined that a control isn’t operating effectively, compensating controls may be required. Additionally, finance and accounting teams should evaluate any new risks that might require new controls. Organizations can mitigate their risk throughout the virtual close process by ensuring their controls are designed properly, working effectively and adapting to new requirements.

If, after evaluation, management chooses to change any controls, make sure those changes are properly documented. This impacts your alignment with auditors— which should be ongoing as you inform them of any process or control changes, potential emerging risks, or testing and documentation. This will help alleviate some of the bottlenecks organizations might see during the virtual audit process as well.

Set Up Protocols for Issue Resolution

In a virtual close environment, problems will inevitably occur, whether that means a technical issue related to access or delays while obtaining required information. Management should develop a process for employees to raise issues and then a policy for how management should offer solutions for those issues. This process should then be made clear to employees.

Risk Rank Close Activities

At the beginning of the close cycle, consider risk ranking each task. For each close activity, determine the likelihood that the task will be disrupted or delayed. Risk ranking each activity of the close will allow management to develop a mitigation plan early in the process for higher risk tasks and, in turn, will be able to limit the chance of disruption or delays to them.

The changing global environment means that organizations need to consistently evaluate the effectiveness of their current financial close policies. Though performing more work with less resources in the midst of a global pandemic is very difficult, it will ensure that organizations— and its employees— will emerge stronger than ever.

Download 4 Common Virtual Close Challenges to further enhance your financial processes.

Written by: Ashton Mathai