The requirements for the financial close process are high as reporting is subject to far more extensive regulations. At the same time, companies are under increasing pressure to keep costs down and get vital financial data faster.
Let’s have a look at what are the most common causes of financial close process inefficiencies.
Poor closing task management
Nagging people over whether they have completed a task leads to inefficiencies and wasted time. It is hard to stay on top of everything in a barrage of emails and spreadsheets. In addition, several month-end close process tasks depend on each other. You may have to wait for task A to be complete before proceeding to task B.
For example, the person responsible for task A might forget to check the complete box in the spreadsheet. The person responsible for task B may be standing by for hours until they realise that the dependent information for task B is ready. The closing team leads could be spending valuable time sending reminders to dozens of people instead of focusing on more value-added activities.
In addition, poor task management can also be responsible for the inability to verify compliance symptom. For instance, someone could forget to attach supporting evidence or could forget to sign off on an entry requiring approval. Additionally, it can increase both costs and inefficiencies if you have to involve more people for each task to ensure it is done correctly. Conversely, healthy task management should give you the visibility to see what is done and when without having to wait or ask around.
Lack of financial close management system integrations
Having to manually compare and move data between systems causes inaccuracies and exposes your financial close process to a heightened risk of human error. But that’s not at all. Constantly switching between ERPs, spreadsheets, emails, and other interfaces eat up extra time and add yet another stress factor.
This stress compounds the inaccuracy symptom while also slowing down the month-end close process and feeding further delays. The root cause of lacking system integration, in turn, usually stems from limited functionalities. Outdated systems and, most importantly, the lack of direct integration with the ERP system is another cause.
A lack of system integration may also make certain manual close processes inefficient. One example is comparing general ledger account balances with sub-ledgers and bank statements. Another is manually entering all the figures in a journal entry. In a healthier financial close process, these tasks may still be manual, but when supported with an integrated system and a certain degree of automation, they can be completed faster and easier in less time and at less expense.
Automation brings clear benefits to the close process in terms of efficiency, transparency, and speed. However, in finance organisations lacking automated capabilities, tasks are often delayed simply when a key member of the team is on vacation or out sick. Another warning sign is continual delays on mundane tasks due to competing priorities—when the finance organisation can’t walk and chew gum simultaneously. So it may be time for a gut check on automation.
With the integration between your ERP system, you can seamlessly link automated reports with automated notifications and accompanying manual tasks. This empowers your team to initiate, track and configure automated tasks in a more comprehensive manner.
For instance, a powerful close task management system should track when a ledger is closed and automatically trigger the corresponding ERP program. It should also automate manual calculations based on specific rules, such as calculating a given percentage on a certain line item based on the company code used.
Sounds interesting?
