Financial Close Optimization
With today’s volatile and uncertain conditions, many entities, both commercial and public sector, are overlooking the financial close process as a lever of fiscal and operational success. Why you may be asking? From our work in this space, many of these entities see this space as either a recurring requirement with low value-added or, that their current close process is well optimized.
Profitability, cash flow, market volatility, and risk are still areas of concern for executive management and part of boardroom discussions. CFOs, in particular, have even more influence now and are expected more now to drive excellence within and across financial accounting, planning, and analytics processes and capabilities for their organization.
CFOs must find ways to consistently and continuously reduce the time it takes to complete the close process (monthly, quarterly, and year-end) while ensuring the financial planning and all related reporting disciplines and processes are aligned.
Challenges Facing Organizations:
- Tighter budgets where companies are asked to do more with less
- Higher number of external regulations requirement more formal and efficient processes in order to prove compliance
- Reluctance to change process and implement or upgrade systems
- Lack of visibility and unawareness of efficiencies across the finical close process
- Concerns that Speed of Close could compromise reliability of published financials
- Concerns about complexity, resource commitment levels, cost, and readiness to implement and integrate best in class technology and processes
- Fighting to keep up and utilize disparate systems which lack integration and cause low-value add, inefficient work
Sonora & Associates’ Solution to Optimizing Financial Close
Our solutions have always been centered around the key controllable areas that contribute to financial close excellent – People, Process & Technology….in that order!
This is the first and most critical building block in financial close optimization. Your organization must have a centralized owner of the close process that understands close KPIs and is laser-focused on closing faster with improved or impeccable accuracy.
All close personnel must be empowered to do their job efficiently and accurately. The must be an emphasis on deadlines, tracking and reporting performance against deadlines. Visibility of the close process, deadlines, ownership, tacking, and status tracking of close steps and KPIs should be made accessible to all involved – including executive leadership. This will create urgency; drive accountability foster communication and establish successful behavior.
Remove non-finance activities from finance personnel. This will further drive financial close optimization as it removes unnecessary tasks.
Your organization must define and publish a close calendar and its related supporting policies, procedures and communication plan in support of this close process. Here are some examples of key elements that you should start on:
- Outline or Review Key Policies and standards. e.g manual and late entries policies and metrics can highlight poor quality work and inefficiencies
- Get a handle on your reporting activities. Evaluate reports inventory, usage, and alignment with organizational objectives and needs
- Find process bottlenecks and understand root cause
- Define clearly roles and responsibilities
- Focus on clear, effective communications within and between functional areas and pay particular attention to handoffs within and across processes
With the advancements in hardware, network, infrastructure components and services, software and the proliferation of mobile capabilities, it imperative your organization defines and implements technology solutions to increase the speed and accuracy of the close.
- Move away from siloed, disparate systems and invest in best in class enterprise systems.
- Implement close and consolidation applications and systems that have tight integration points, are scalable, secure, and accessible anywhere.
- Look into PaaS, IaaS, SaaS solutions and vendors that support your financial close needs when and where possible.