Source: NetSuite Blogpost
For many in the finance department, the phrase “financial period close” brings with it visions of long days filled with time-consuming, cumbersome and stressful processes. Yet, despite the time devoted to it, this record-to-report process of accounts reconciliation, journal entries and financial reporting is essential for providing accurate information on business performance and ensuring compliance.
It doesn’t have to be so painful, however. Indeed, every CFO dreams of a faster close. Recent research shows why. In APQC’s General Accounting Open Standards Benchmarking survey, the bottom 25 percent of the 2,300 respondents said they need 10 or more calendar days to complete the monthly period close – the days between running the trial balance to completing the consolidated financial statements. In contrast, the top 25 percent of performers complete the monthly close in 4.8 days or less.
A faster period close process has two significant benefits. It gives executives in the business timelier access to the very latest data available, enabling them to make quicker and better-informed decisions. For the CFO and finance team, less time spent on closing the books means more time providing the analysis and insight that the business needs to make key decisions. They can provide input into scaling operations up or down in response to cash flow demands or changing market conditions, or how to reallocate resources in order to jump on an emerging opportunity.
At the same time, however, there is no room to sacrifice accuracy for speed. There are ways to have both. Smart finance teams are now employing ‘continuous accounting.’ Continuous accounting distributes the finance team’s workload evenly over an accounting period. If tasks normally associated with period close – such as reconciliations – are embedded in day-to-day activities throughout the month or quarter, there’s no last-minute demand for extra work as period end approaches, speeding up the process of closing the books.
The impact of continuous accounting can be felt beyond just faster close periods and relief for the finance team. Done right, continuous accounting can also improve real-time reporting and keep the finance function in step with the wider business, more closely attuned to the rise and fall of the organisation. The link between opportunities and challenges and their financial impacts are more immediately visible to all, enabling better-informed decisions.
However, there is a significant barrier to continuous accounting for many organisations: a hairball of incompatible finance and IT systems and unconnected spreadsheets.
To truly embrace continuous accounting, organisations need a modern cloud-based finance and ERP system, such as NetSuite, that delivers data integrity and consistency, standard processes and automation. A unified ERP system with all departments working of the same source of data with access to the same general ledger, provides a common chart of accounts and a single version of data on inventory, payroll, sales orders and customers.
With a common data source, organisations can automate many of the previously manual tasks, such as journal entries, account reconciliations, variance analysis and intercompany transactions. With the cloud those can be executed automatically.
What’s more, with the entire finance team united through the cloud no matter where they are, it’s easier to more efficiently delegate financial close responsibilities. For example, if a typical financial close takes five days and requires 25 processes, the CFO can assign out five tasks per day to the global finance team. On day two, with all those tasks in the system, the CFO can see a report on what tasks from the prior day are not yet complete and address it. Gone are the days when managers and staff are giving CFO the answers they think he or she wants to hear. Moreover, the CFO knows who’s on target and where and how. In a cloud-based system, the CFO never has to ask the question and they always get a straight answer.
The CFO also has the ability to run KPIs on the close process identifying which individuals or locations are not completing their tasks on time and reallocating resources appropriately.
A faster – and smarter – period close can deliver considerable value to the organisation, giving more relevant management information earlier and freeing up a lot of valuable time for the finance team and CFO to contribute more strategically to the business.
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