Did you survive the December financial close storm?
While the rest of the company was planning the Christmas party, talking about holiday goodies, turkey recipes and gifts, were taking cover from the dark clouds of the year-end close?
Dark Clouds Ahead
The financial close processes are complex and time consuming. It is often a mix of manual consolidation of spreadsheets, intensive consolidation of different ledgers and combining data from multiple financial systems.
The financial reporting process is critical and time-sensitive. The risk of incorrect reporting increases when faced with the following:
- Financial figures are incorrect due to manual re-entry, unauthorised changes and omissions.
- No clear escalation path or unplanned activities.
- Missing documents and associated data.
- Lack of a clearly defined workflow and documented policies.
- Poor understanding of tasks and effort needed to close. This leads to an inability to properly forecast close deadlines.
As the size of a company increases the time and complexity of the financial close process increases.
Regulatory compliance requirements can further complicate the process. Multiple versions of financial reports are required.
Bringing Some Sunshine
Close cycle times i.e. the total time taken from the beginning to the end of the process, business and IT resource requirements together with compliance costs can only be reduced via efficiency and accuracy increases.
Major events such as adoption of new legal reporting requirements, company merger, acquisition or business unit consolidation present great opportunities to revamp the close process.
Practical Tips – Have a few umbrellas ready
Based on experience, we have seen that the following strategies can help:
Reducing the number of accounts
Reducing accounts reduced the number of reconciliations needed. This greatly reduced the time taken to load data and run the reconciliation process. Manual data entry is also kept to a minimum with defined checks in place before hand.
Reducing manual input
The more churn there is with the data after loading, the higher the risk of errors and delays. This is exacerbated when there are multiple divisions, across different applications and spanning different time zones. Locking down changes at the base entity level is also critical since at this level the number of users is the highest.
Reducing manual input can shave weeks of the close cycle.
Reducing the number of entities
This is obvious but often difficult to implement due to legacy systems used. The greater the number of entities that must be consolidated, the longer the consolidation will take.
Using data extraction tools
A new set of tools is now available for automating financial close workflows and data extraction tasks. These are useful for business side roles and offer greater speed and flexibility with a light touch needed from IT. For example, Hyperion Financial Management is a popular application for financial close management, but extracting and integrating Hyperion data is non-trivial.
Be prepared for the next close period
There is an increasing demand from business users for accurate and personalised data to support their financial close tasks. This places pressure on IT teams to make traditional data integration and provisioning capabilities available to business users.
Applying some of the strategies above I hope will reduce the stress of the next stormy financial close out period.
ScaleFocus Cognos Team