16.10.2019

4 foundations for a compliant period end close

Organisations generally are striving for a fast and timely as well as accurate close. On top of that, finance and accounting teams are facing ever-increasing internal and external compliance requirements. No matter what the business industry and organisation specifics are, the following foundations for a compliant period end close are relevant to any organisation.

1. Close schedule and tasks.

Period end close can only be performed in a timely manner if there is a clear definition of the process and tasks. Whilst process definition is an essential requirement, many large organisations struggle to implement them relying on old approaches, past experiences and an individual’s ability to organise their work. There are several risks and consequences associated with the lack of a period end close process definition:

  • Lack of control. No tasks to track results in no means to control what or when a task is being done or by whom.
  • Limited opportunities to improve. Technologies supporting finance and accounting operations like intelligent process automation tools can significantly speed up financial close. The technology, however, can be applied only for clearly defined tasks and processes.
  • Late reporting. A poorly defined process usually correlates with late reporting. Organisations might be consistent with the timing of period end close yet deliver reports to the business management much later than is potentially possible.
  • Audit compliance failure. Defining a process, with assigned responsibilities and clear approval processes increases the ability of the organisation to comply with the auditor’s requirements.  Tracking the closing tasks, any associated journals and finally the account reconciliations in a single place makes proving adherence to audit compliance simple.

Solution:

Replace shared spreadsheets and emails with intelligent close management tool.Aico software tool for close task management is based on task templates, which are run at specific intervals. Closing task templates are fully configurable, but they typically include information like task name, description, company, close period, priority, risk, preparer name, due date, dependency on other tasks, and approval workflow. Teams of accountants no longer have to rely on shared spreadsheets to track close tasks and due dates; instead, they can perform their tasks via software and follow the progress of the close in real-time.

 

2. Segregation of duties. 

Lack of clear segregation of duties can cause extra workloads to accountants involved in the close process and is a critical compliance requirement. Lack of segregation of duties can also pose risks to an organisation’s finances. To illustrate this, let’s look at the manual journal entries, which accountants prepare, approve and post in the ERP system. Leaving this end-to-end journal management in the hands of one person can result in posting high-value journals inappropriately without any measures of control. Having clearly defined duties and approval rights minimises risks and contributes to an audit compliant close.

Solution:

Define duties within the team with smart workflows. Intelligent process automation tools designed specifically for finance have to be highly configurable, so that organisations can define their preferable workflows. For example, Aico’s manual journal entry management solution offers a role-based authorisation model. It means that you can predefine who can create different types of journals, what kind of approvals they need and who can transfer journals to your ERP systems.

 

3. Supporting evidence. 

Compliance and audit come in one sentence and often result in headaches and stress to many accountants. It is easier to perform the period end close in a compliant manner once rather than add missing documents when the audit comes. Supporting evidence for manual journal entry postings are usual suspects for auditors. So, making sure the team of accountants attach relevant supporting evidence to every journal posting can save you much time during the audit and increase your compliance performance.

Solution:

Enforce mandatory supporting evidence attachment. Implementing process automation tool like Aico, which is developed specifically for financial close purposes, allows organisations to define what kind of transactions require supporting evidence and enforce attachment of documents systematically.

 

4. Back-up documentation. 

Digital back-up document archiving is an excellent example of compliance contributing to the speed and timeliness of the close process rather than making it troublesome. Physical document archiving has a significant impact on costs and pace of both close and auditing. Not only materials have to be printed out, checked for accuracy and approved by appointed individuals (who sometimes might be in different location), there also has to be a control mechanism ensuring the documents are archived correctly. Flawed document archiving process will result in compliance violation and increase the time spent on auditing and ultimately, also the costs.

Solution:

Automate back-up document archiving. An intelligent process automation tool like Aico ensures that archiving is done when, for example, a journal is approved and posted in the ERP system. All transactions recorded to journals are saved in a format that makes permanent archiving easy. Archived documents can be viewed from Aico, but additionally, a PDF version of each journal is created to meet legislative compliance requirements. Auditors can access digital archive remotely and review transactions and associated supporting evidences.

About Aico.

Aico helps mid to large size companies deliver their financial close process up to 50% faster. Our solution is a ready-made intelligent process automation platform to manage key financial close processes like close task management, account reconciliation and journal entries. Book a live demo to find out how Aico can help transform your financial close:

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