Our Perspective

With external, internal and cost pressures placing increased demands on finance departments, now is the time to establish a faster, smarter close and reporting cycle. Initially, finance executives must focus on discipline, control and accountability rather than speed. Timeliness, accuracy and transparency are critical, and unfortunately, there is no “silver bullet” that can transform the cycle overnight. It is through incremental wins that companies are able to create sustainable solutions. With an effective process, companies can explore ways to use data to manage performance more intelligently within finance and throughout the organization.

Across all industries, truly successful closing cycles share a number of characteristics. Perhaps most importantly, they focus on accuracy as opposed to speed and take advantage of opportunities to improve accountability and control throughout the cycle. Smart closes are also simplified and standardized to eliminate unnecessary complexity and inconsistencies. Additionally, they are streamlined and optimized by appropriately sequencing work steps and by eliminating bottlenecks, duplication of effort, and non-value added activities. Lastly, smart closes are process-focused and effectively leverage existing technology. Efficient cycles need not center around the latest and greatest technology. In most cases, current systems can be modified or enhanced to deliver the necessary data.

Best practice companies are able to produce consolidated reports within five business days. All too often, companies with a five- to seven-day close cycle are not actually able to produce reports for several more weeks. In many cases, this accelerated cycle is followed by a series of post-close adjusting entries that continue up to the release of earnings. From our perspective, the books are not closed until the numbers stop moving. Continuous adjustments are one of the most prevalent problems facing companies today. There are a number of other indicators that suggest there are opportunities to improve the close and reporting cycle. These indicators are: Lack of speed — Companies that take more than five days to close and generate consolidated results, require more than 30 days to publicly release earnings, and provide limited support for business and operational decisions need to add speed to the close and reporting cycle. Insufficient accuracy and/or control — Companies that record significant adjustments or corrections after the books are closed, have difficulty balancing inter-company transactions, and create external financial reports that differ from internal management reports need to improve accuracy and enhance control. Dependence on manual processes — Companies that rely on manual recurring journal entries, account reconciliations and consolidations, off-line Excel spreadsheets, multiple charts of accounts, and disparate systems need to leverage technology more effectively. Ineffective decision support — Companies that have difficulty identifying potential financial surprises far enough in advance to correct them, capture excessive detail, and utilize complex reporting and legal entity structures need to align processes to provide timely, accurate and relevant information to the organization.