Search for the Fast Close: What's Old Is New Again
People, Process, Technology Factors
Article Tools
Resource Center
Access white papers, product demos, and presentations from companies whose reputations have been built on helping BPM practitioners get the most from initiatives.
- BPM 101: Selecting a Business Performance Management Vendor" -- new white paper from BPM Partners
- "The Finance Challenge of Aligning the Business With Strategic Goals," a podcast featuring Palladium Group's Phillip Peck
- Ventana Research white paper "Decision-Making and Performance: Improving Essential Business Analytics and Technologies"
- “XBRL at a Glance,” white paper from XBRL US
advertisement
Companies can't change the external environment to reduce the pressures legislation and regulations are placing on the close process. But for many large U.S. businesses, the deceleration of the close cycle has been exacerbated by a mixture of human- and technology-related factors -- factors that they can control. Because more people than ever before need to review a company's financial data and then sign off on it, inconsistent or incorrect information anywhere in the company can cause huge problems. When one person's data is inaccurate, the close process is effectively on hold until it's resolved -- and the time it takes to correct inaccurate information can be hours or days. Businesses that fail to get to the "right the first time" position are paying for inaccuracies through a lengthened financial close.
Ultimately, keeping data accurate is about processes, and changing processes requires strong leadership and sustained commitment. In addition to compliance requirements, several process problems can lead a "fast close" to become a "slow close." For one, the financial close is delayed when too few people within the company have a "right the first time" attitude about the processing of underlying transactions. Poor understanding, communication, and support of corporate accounting policies at the subsidiary level complicate any attempts to speed up reporting. Weak intercompany reconciliation processes and difficulties associated with having multiple charts of accounts and a multi-GAAP reporting environment are sure to cause problems. Likewise, reporting procedures and systems that are not highly standardized and automated, or poor processing performance of information systems supporting the closing cycle, put an organization at a distinct cycle-time disadvantage. Systems that are not integrated to support companywide performance management affect not only the speed of reporting, but also the quality of planning.
Software Can Help
Software can play a monumental role in building efficient financial processes, so it can be instrumental in speeding up the close. The BPM Magazine/Cartesis survey found that many features of BPM software speed up the financial close (see exhibit 4, below). Following is a list of the top reasons why BPM software can be an invaluable tool for speeding up close processes.
It integrates accounting data. Software that provides a shared financial platform and a single data repository for budgeting, reporting, and forecasting processes inherently decreases cycle times because shared data structures reduce the need for reconciliation between systems. Thirty-eight percent of respondents to the BPM Magazine survey said that integration of actuals, planning, and forecasting data in a single BPM solution is very important in achieving a fast close.
It provides detailed audit trails on changes to the data. Detailed audit trails can reduce both investigation times on balance variances and the length of the external audit process. Forty-three percent of respondents said audit trails are extremely important in achieving a fast close.
It automates numerous manual, time-consuming activities. Processes that BPM software is designed to automate include journal-entry processing; data extraction from source systems, which reduces errors by eliminating rekeying; intercompany matching and elimination; and a wide variety of controls and reports, including automated cash flow, currency translation adjustments, minority interest, and equity calculations. Fifty-six percent of respondents said that workflow capabilities (approvals, routing, etc.) are important in achieving a fast close.
It decreases the tendency toward spreadsheet lethargy. In order to prevent the e-mailing of spreadsheets and the manual upload of information, BPM software can automate data entry and reporting, while allowing updates to be made directly to the system via an Excel-like front end. Manual processes that involve spreadsheets increase the risk of errors, such as adjustments that are not captured and one-sided journal entries. Seventy-seven percent of survey respondents found automated report distribution or access to financial data over the Web to be at least somewhat important in achieving a fast close.
It enables real-time process management. This can isolate process bottlenecks like slow reporting units, problem accounts, and abnormal variances. Sixty percent of our respondents said that embedding and automation of controls, business rules, and calculations are important in achieving a fast close. For the majority of respondents, automated generation of consolidation reports is also important in achieving a fast close.
It increases distribution and visibility of key performance indicators. BPM software enables a wider audience to access financial data via a controlled platform or the Internet. Getting the right information to the right people at the right time is invaluable.
At present, the financial close cycle is getting longer for many U.S. companies, and more people are required to get the job done. Increased shareholder concerns make it even more important to speed up the close cycle now, before additional regulations are put into place. Software solutions help accelerate the close, and many of them are lasting fixes that will save companies hours of time and headaches. With the help of performance management software, unnecessary manual activities can be eliminated and the finance staff can easily and more speedily close the books -- saving employees time and the company money.
Didier Benchimol is CEO of Cartesis. He has been involved with the tech industry for over 20 years, holding senior positions at companies like the Paul Allen Group, Netscape, and CDP Technology.
