The month-end closure procedure is often difficult for a busy Finance department. Many companies have various profit and loss statements, balance sheets, and data sources, with foreign structures bringing additional challenges. There is never enough time to meet the tight deadlines of financial close, and this can lead to mistakes. In addition, regulatory requirements are affecting the closure schedule, and often require more time to compile reports for compliance regimes like Solvency II.
When there is no automated system for financial close, the substantial job of manual adjustments during the financial close process is delegated to finance employees. Supporting all stakeholders becomes more difficult as a result. Then there are the Quarter End, Half Year, and Year-End processes, which all add to the demands and workload.
Financial Close Challenges
A continuous closing process can help both companies and employees with the month-end or period-end financial closing process, negating the need to handle a huge volume of inter-departmental data in one go. But the time and effort required to do this manually leads companies to keep with month-end or period-end financial closing. This leaves them back at square one with time pressures and human errors, leading to late or inaccurate reporting.
In a survey conducted by Accountagility, CFOs reported several financial close challenges, and the following are the impacts created on the financial close process of their organisation:
Lack of a defined process
53% of CFOs claim manual adjustments are their biggest bugbear, and they are forced to make these adjustments due to manual errors
Lack of automated processes
94% of businesses close their ledger early as longer employee hours are required for creating closing reports manually
Reliance on spreadsheets
56% of CFOs report too many spreadsheets prevent them from having effective (and more) planning cycles a year
Lack of Audit trail provision
50% of the time and effort incurred in performing the month-end close process
Huge volume of data
66.5% of those polled said they close two days early, with a quarter closing a day ahead to overcome the difficulty of processing such enormous amounts of data
The financial close process can be improved only if businesses overcome all the above-mentioned challenges in their finance department. Here lies the importance of having an automated system for the financial close process and this is the reason why many businesses move to financial close software to improve the process.
Using Automated Financial Close Software to Improve the Process
With the introduction of advanced processes, financial close software aids in the automation and reproducibility of your close process. It lowers the risk of data inaccuracies and manual errors that might arise with the traditional financial close procedure. The financial close softwarecan improve the entire process by reducing the number of hours spent on the financial closure process by up to 50% throughout each period, allowing the closing process to be completed faster while retaining data accuracy.
With the use of a streamlined, automated, and audited sign-off method, it improves accuracy while saving time on approval processes. This allows you to delve deeper into reporting and planning, ensuring that faults are swiftly identified and corrected.
Benefits of Using Financial Close Software
Quick Outputs: Financial Close reporting can be produced more quickly, more frequently, and at a lesser cost.
Better Insights: Better analysis can be done, and more insights can be gained.
Data Analysis: For analysis, non-financial data can be simply combined with financial data.
Easy Auditing: Audits become less time-consuming and easier to conduct.
Automation: Highly qualified employees devote less time to low-value-added manual tasks.
Data Accuracy: There are fewer inaccuracies, and managers may have faith in the numbers.
Does your Business need Financial Close Software?
A standard operating procedure should be created and maintained to manage financial processes in every company. Financial closes that don't have a defined, step-by-step operating method are inefficient. Every individual or team participating in the closing process should follow a clear and exact standard operating procedure to expedite the process.
A company's initial step should be to identify inefficiencies. For example, is your balance sheet becoming too large and complicated? You are on the right track if you understand the fundamental reasons for process issues. Speak to an expert for a better understanding on Financial Close Software and how it can help your organisation’s financial processes.
Product Director - Accountagility
Marcus is an experienced IT executive and consultant with over 20 years of involvement in digital transformations ranging from £5m to £1bn+, for both public and private sectors, and across many industry verticals. Having spent time in leadership roles in both end client organisations, commercial vendors, and Management Consultants; Marcus is passionate about aligning business and IT agendas to ensure companies get competitive advantage from their technology choices.