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Experts name tools and strategies for a speedy financial close process

One CFO found salvation in consolidating financials on cloud ERP, while others point to collaboration and workflow tools to coordinate the financial close.

One of the main challenges confronting CFOs is how to speed up the monthly financial close process.

That was the situation Roberta Hopkins faced three years ago when she was named CFO of Georgetown Visitation Preparatory School, a 217-year-old Catholic high school in Washington, D.C. Hopkins recognized that to better serve students' families, the institution had to modernize its financial operations.

Georgetown Visitation knew it had to replace its on-premises Blackbaud Financial Edge system, which didn't sync with the school's other applications, such as its tuition payment services, a school management system and a fundraising and donor management system. After researching various financial management systems, Hopkins said the institution implemented cloud-based ERP from Intacct.

In addition to streamlining the accounts payable process and financial reporting, Intacct has helped the school speed its monthly financial close process by five days, she said. Eliminating paper transactions and streamlining the processes so people have easier access to the information they need is key to accelerating the financial close, she said.

"You should not have a huge cumbersome process to close your books," she said. "You should be able to hit a button, see where you stand, review it, make some adjustments and hit it again. You want all the information to be coming from one system and it should all be automated."

Faster financial close process also saves money

Other organizations are seeing similar benefits from automation. According to data from Houston-based APQC, a nonprofit research and benchmarking firm, the top companies completed the financial close process in 12 days or fewer, while the bottom performers needed 18 days or more to close the books. The median cycle time is 15 days.

And these top companies get the job done for one-quarter of the cost incurred by the bottom performers, according to APQC.

A number of things must happen for a successful financial close, said Craig Schiff, president and CEO of BPM Partners, an advisory services firm based in Stamford, Conn.

There is a lot of detailed account reconciliation so that capability must exist somewhere, either in the ERP or a specialized system, he said.

"But really, it's a bigger process than that, so you really need something to track what the various tasks are," Schiff said. "There are a lot of different people involved, and each has their own assignments. And one of the challenges is tracking all of that as you're trying to get this close done. Who still owes me what? And also knowing what's expected of you as a contributor to this process."

The problem is that many ERP systems lack the good workflows and process tracking needed to manage the financial close process.

Another important step in the month-end close is reconciling intracompany transactions, according to Schiff.

"So if one of my divisions sold to another one of my divisions, that's not really a net sale, so in the end, I need to eliminate that transaction," he said. "So if Division A said it sold something to Division B, but Division B on its books doesn't say it bought something from Division A, then you have a problem that's flagged, and someone has to figure out why that is."

Collaboration is another key element in the financial close cycle, according to Schiff. For example, a CFO who spots a problem in a particular division must be able to alert that division so it can attempt to reconcile it and determine what went wrong or is missing, he said.

"There's a lot of management here with the process, the workflow and then collaborating with other people involved in this process," he said. "Being able to communicate with them, ideally within the system, [is important]."

Closing in on the technology

Because time is money, what tools and strategies can CFOs use to shorten and improve the financial close cycle?

The large ERP vendors have come out with more comprehensive tool suites that help with the financial close, said Mario Desiderio, managing director at Huron Consulting Group, based in Chicago.

The close is no longer just about closing financial reports. "A lot of the vendors are taking into account the financial close, the tax function and the tax provisioning components," Desiderio said, by providing tax reporting systems that integrate directly with the broader financial reporting process.

There's also a trend among companies to consolidate the number of vendors," he said. "In addition to offering the comprehensive general ledger, the large ERP providers also offer the financial close and consolidation and tax applications where they're integrated for you," Desiderio said. "So you as a CFO don't have to be in the business of technology and integrating multiple products. You're buying from one vendor that provides the end-to-end solution."

A CFO also needs a tool that provides a user interface with all the necessary, high-level information in real time on the first screen and the ability to drill into specific accounts or specific divisions for additional information, said Seth Lippincott, an analyst at Nucleus Research in Boston.

"Having your chart of accounts completely mapped out so that you know what different accounts they're going to pull the information from is also important," he said.

Lippincott agreed that automation is the key to a successful financial close. "A lot of people hours [are] spent on consolidating all of the information that is siloed in various systems, pulling it and getting it all in the same spot," he said, adding that tools from vendors such as BlackLine and Oracle help break down the silos between departments and pull in information automatically and in real time.

CFOs should take advantage of all the components of a vendor's financial close suite, beginning with the account reconciliation component as well as some of the foundational components for master data management, such as the chart of accounts, according to Desiderio.

Deploying financial close management tools has other benefits besides getting the monthly close right.

BlackLine software enabled an Australian steel supplier to standardize and automate much of its account reconciliation processes, giving the company greater visibility into the financial performance of different divisions so it could more quickly identify and correct discrepancies, according to information provided by Nucleus Research.

Equipping managers with one system of record for all of the financial records and supporting documentation allowed the company to quickly review reconciliations and reduce the time to close quarterly reconciliations from five days to one.

Next Steps

Get metrics on more efficient financial management

Learn the financial-close benefits of CPM software

Understand last mile of finance (LMOF) tools

This was last published in October 2016

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