How COVID-19 Exposed Weaknesses in the Financial Close Process and Accelerated the Path Towards Automation
As companies transitioned to remote operations, organizations that relied heavily on manual processes found it difficult to continue to do their jobs at the same level – let alone deliver on the new expectations required of them to provide timely, critical business insights. It is certain that these expectations are now essential for businesses moving forward, however, the ad hoc processes many organizations were forced to adopt in the short term to meet those expectations are not sustainable long-term. Now is the time for organizations to institutionalize technology to standardize and automate key financial processes to be able to continue to support these growing expectations.
Conducted in Q1 of 2021, the Trintech 2021 Global Financial Close Benchmark Report provides an analysis of the research compiled from:
430 organizations globally
- 35% of large enterprise organizations
- 65% mid-market organizations
500 financial professionals
- 14% C-suite executives
- 36% managers or directors
- 50% finance professionals
- Which parts of the financial close have been automated
- What is in the process of being automated
- Where F&A teams are looking to adopt automation in the future
Key Outcomes of the Survey
Modernize for Growth
Today’s leaders need accurate, real-time financial information to guide their organizations and make business-critical decisions, which requires modern technology.
Standardize & Automate
Without standardization and automation, the quality and accuracy of numbers, the support of remote work, and the insights that finance needs to deliver will be negatively impacted.
Push Automation Further
Best-in-class organizations are embracing more advanced technology to examine trends in their data to identify abnormalities and automate workflows based on the associated risk.
A Year in Review: Financial Close Challenges
Looking back at the last 12 months, there was a major shift in how businesses operated as organizations transitioned to a remote work environment while navigating unprecedented circumstances. As companies transitioned and tried to adapt, new expectations added even more complexity for finance teams adjusting to a virtual close within their new work settings.
Survey participants were presented with a list of seven widely known challenges for the Office of Finance and asked to choose which two had the biggest impact on their organization in the last year. The respondents indicated that they primarily struggled with:
- Meeting Deadlines & Time-Pressures (51% of total responses)
- Remote Work (46% of total responses)
- Providing Analysis to Gain Business-Critical Insights (27% of total responses)
- Reduced Team Size (27% of total responses)
From these top four selections, meeting deadlines and remote work were prioritized as the most pressing financial close challenges. As a result of switching to remote- or hybrid-working environments, there’s no question that many enterprise organizations struggled with the transition.
A Lack of Automation Is Recognized as the Largest Contributing Factor to an Inefficient Financial Close Process
While 88% of the respondents identified lack of automation and manual work and errors as the reasons preventing them from having an efficient financial close process, 78% of respondents reported that they still do not have mature automation in place for their financial close. And almost half (45%) of respondents reported that their automation is still very basic and extends to only being able to export spreadsheets from their respective ERP systems.
As companies transitioned to a remote work environment, the methods, and tools that the Office of Finance previously relied upon to complete their financial close were no longer feasible options since many of them were manual and utilized disparate systems. This ultimately led to a decrease in efficiency and an increase in the likelihood of missing deadlines and providing inaccurate reporting.
What are the top 2 factors that prevent you from having the most efficient financial close process?
What’s Next: Optimizing the Financial Close over the Next Year
When asked about their key areas for improvement over the coming 12 months, respondents identified the following areas as their priority:
- Financial process automation: 36% of respondents said that areas like Automated Matching are their main focus in 2021
- Process standardization & streamlining: 32% of respondents said that areas like Recs Policy Standardization are their main focus in 2021
- Improve quality & accuracy of numbers: 12% of respondents ranked this as their main focus in 2021
It is important to note here that standardizing and automating the financial close processes should not be completed in a vacuum. Standardizing how a process is done is one part of a best-in-class approach to the financial close, but the processes should be able to be repeated effectively to allow automation to be implemented. In other words, it’s best to think about standardization and automation in parallel, to increase the benefits of both.
Looking Ahead: Financial Close Challenges in 5 Years’ Time
The survey identified, that finance professionals foresee future challenges mainly in two areas:
- Work Capabilities: Completing quality work, making sure everything is done, and meeting deadlines were identified as the biggest challenges by 50% of the respondents
- People Management: Overtime and employee burnout, as well as attracting talent were mentioned as the biggest challenge by 33% of the respondents
The uncertainty brought on by the pandemic and the increase in work volume that came with it clearly impacted the 50% of respondents who were concerned with their future work capabilities. While managing the new environment and challenges that emerged in 2020 — a huge component of financial transformation comes down to your most valuable assets — your people. It is critical to think about people, process, and technology in parallel because they are the key components to transform an organization’s Office of Finance.
For better or worse, financial professionals will remember 2020 as the year that their role within the organization shifted to be more strategic and forward-looking, rather than focused on historical reporting. With that shift came increased expectations to drive critical business decisions through the delivery of financial numbers and insights in a timely manner. Ultimately this change in expectations also requires a change in technology for the Office of Finance. Historical tools like spreadsheets and their accompanying manual work, simply don’t give organizations the needed insights and efficiency gains that are needed to fulfill the increased workload and expectations.