COVID-19 Exposed Weaknesses in Organisations’ Financial Close Process and Accelerated the Path Towards Automation
As companies transitioned to remote operations, organisations 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. What is certain is that these expectations are now essential for businesses moving forward, however, the ad hoc processes many organisations were forced to adopt in the short-term to meet those expectations are not sustainable long-term. Now is the time for organisations to institutionalise technology to standardise and automate key financial processes to be able to continue to support these growing expectations.
Benchmark Report Demographics
Trintech conducted a global survey of 486 financial professionals across 430 organisations in Q1 of 2021 to evaluate which parts of the financial close process have been automated, which are in the process of being automated, and where finance and accounting (F&A) teams are looking to adopt automation in the future. Covid-19 exposed weaknesses in organisations’ financial close process and accelerated the path towards automation.
In the survey, Trintech received responses from 65% mid-market organisations and 35% large enterprise organizations. Of the 486 finance professionals surveyed, 14% were C-suite executives, 36% were managers or directors, and 50% were finance professionals. The Trintech 2021 Global Financial Close Benchmark Report provides an analysis of the research.
Survey At A Glance
Completing quality work on time, while simultaneously balancing workforce issues (i.e., attracting talent and managing employee burnout) will be the biggest challenges for finance professionals over the next five years.
Process standardisation and streamlining within the financial close are being prioritised by the Office of Finance this year.
Financial automation is essential for organisations to thrive. A lack of automation is identified as the largest contributing factor to an inefficient financial close.
Financial Close Challenges in the Past 12 Months
The past year saw a major shift in how businesses operated; organisations worked remotely while navigating unprecedented circumstances. As companies transitioned to remote operations, these new expectations added even more complexity for finance teams adjusting to their new work settings.
Of the seven options that respondents were given, mid-market organisations chose their top two challenges in the past year. The respondents specified that they mainly struggled with:
- Meeting Deadlines & Time-Pressures (74% of total responses)
- Remote Work (68% of total responses)
- Providing Analysis to Gain Business-Critical Insights (38% of total responses)
- Reduced Team Size (34% of total responses)
Out of these top four choices, 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 mid-market organisations struggled with the transition.
Barriers to an Efficient Financial Close Process
In addition to financial close challenges, survey respondents dictated the barriers they experienced during the close process. 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 utilised disparate systems. This ultimately led to a decrease in efficiency and an increase in the likelihood of missing deadlines and providing inaccurate reporting.
When respondents were asked what was preventing them from having the most efficient financial close process:
- 86% identified a lack of automation as one of their top two reasons
- 75% identified manual work and errors as one of their top two reasons
- 40% identified a lack of standardisation as one of their top two reasons
- 32% identified volume of work as one of their top two reasons
Key Area for Improvement Over the Next 12 Months
Over the next year, respondents stated that they would make the following a key area of improvement in their financial close process:
- 38% ranked process standardisation & streamlining (e.g., Recs Policy Standardisation) as their key area of improvement
- 33% ranked financial process automation (e.g., Automated Matching) as their key improvement area
- 11% ranked improve quality & accuracy of numbers as their key improvement area
When we narrow down the responses to mid-market organisations, we see that financial process automation and standardisation are the key areas of improvement for all roles over the next 12 months. Organisations should take a parallel approach by standardising and automating their processes to accelerate the time required to achieve a healthy ROI for their efforts.
Biggest Challenge for the Financial Close in 5 Years’ Time
When asked where mid-market organisations see the biggest challenge over the next five years:
- 54% ranked completing quality work, making sure the work is accurate, and meeting deadlines as their biggest challenges
- 30% of respondents ranked attracting talent and overtime and employee burnout as their biggest challenge
The fact that 54% of mid-market respondents are concerned with their work capabilities reinforces the sheer volume of work that was added to the Office of Finance because of the uncertainty brought on by the pandemic. In addition to processes and technology, it is also critical to think about people because they are the key components to transform an organisation’s Office of Finance.
The challenges that 2020 introduced or exposed, like increased expectations for timely insights, additional workload requirements, and difficulties working with manual spreadsheets to produce reliable reporting will continue to expand — and companies need to acknowledge that the status quo is no longer sustainable and change is required for future success.