Finance: 6 top tips for streamlining transactions to close

McKinsey recently showed how the CFO mandate has shifted over the last year or so. In areas such as company performance, strategy, organisational transformation and resource allocation, finance leaders are increasingly expected to become deeply involved in determining how businesses should adapt. Trouble is, there’s little bandwidth for value-added input if the finance department is bogged down in the same old transactional work month after month - particularly financial close. 

Here’s why financial close processes are so often in need of an efficiency makeover, along with our top tips for shaving time and effort from your cycle.

Why does the financial close process take so long? 

The fact that month-end closes are familiar does not necessarily make them any easier or quicker. 

According to Accounting Today, it takes organisations an average of 6.4 days each month to close their books, with some spending as much as two weeks on it. That’s around a hundred days each year devoted to gathering data, reconciling different records, investigating discrepancies, chasing up information and a host of other tasks. 

So where does all the time go? Common challenges include the following…

Multiple data sources. Various departments and divisions may have their own systems in play. Before you can close, the relevant information from these disparate sources needs to be mapped, validated and integrated. 

Organisational complexity. Structural reorganisation can help in ensuring greater business resilience. The flipside however, is that more subsidiaries and intercompany transactions inevitably means a more complex consolidation process. Eliminating intercompany transactions can require a considerable amount of manual input, including line-by-line entry analysis. 

Reconciliation. To ensure balances are correct, it’s not unusual for the account reconciliation process to involve the detailed consideration of hundreds or even thousands of records. 

Tax and regulatory. Financial information typically needs to be reported for multiple purposes that go beyond basic corporate accounting (e.g. tax and statutory reporting). Depending on the location of the company and its subsidiaries, there may be multiple accounting standards to comply with (e.g. IFRS and GAAP). 

Tips for streamlining 

The following steps can help to make the close process less labour-intensive, time-consuming and prone to error… 

1. Identify your bottlenecks 

How can we do things better? To answer this, you should first try to find the specific areas where input is concentrated and where holdups are occurring most often. It can help you determine where to focus your process optimisation efforts. 

For example, let’s say your account reconciliations always seem to involve a last minute rush. Closer investigation reveals that this is because your core financial team has to wait around for all subsidiaries to send across their balances. They then have to manually input this data into the system. It’s a sure sign that you would benefit from an automated reconciliation solution. 

2. Standardise your processes 

Because it’s such a routine part of the workload, financial close too often relies on institutional memory (“We do it this way because that’s the way it’s always been done…”). The problem with this is that over time, inefficiencies can get hardwired into the system. 

Instead, you should create standard operating procedures (SOPs). These are essentially step-by-step rules governing each task linked to the close process (everything from intercompany reconciliations through to the logging of expenses). SOPs also set out what needs to be completed when, and by whom. 

Further tip: if you have long-established SOPs in place already, consider reviewing them to ensure they are still fit-for-purpose. This SOP review process is a great way of identifying bottlenecks (see above). 

3. Automate data integration 

One of the most laborious elements of the close process occurs at the beginning. This is especially the case if the data required for the process is housed in a mish-mash of systems, spreadsheets and other files scattered through the organisation. Before this information can be processed, it has to be collected, checked and in some cases altered. It’s a recipe for error and delay. 

If this sounds familiar, then a top priority should be to create a direct connection between your consolidation and close solution and the original data sources. Integration can then be automated, with any discrepancies conveniently flagged for you to address. 

4. Consider a complete solution for reporting 

Does effective streamlining essentially boil down to “automating as much as we can”? 

Well, not exactly. If you opt for an assortment of dedicated tools covering specific elements of the finance department’s workload, you can end up with a pretty complex tech stack. Come the month-end, this can lead to complications of its own - including the need for manual adjustments. 

The best outcomes are usually achieved with as comprehensive a solution as possible to meet the finance department’s wider remit. So typically, this would cover not just consolidation and close, but also things like regulatory reporting. Some of the most complete solutions out there (CCH Tagetik, for instance) also include impressive analytics and predictive planning capabilities. In other words, they not only streamline your mundane transactional workload but also massively increase your ability to deliver on business strategy.

5. Embrace self-service data access 

With legacy consolidation and close processes, if a finance team member encounters a discrepancy, it’s usually a case of contacting the individual responsible for the source data and requesting clarification. It can mean a lot of chasing up and waiting around. 

If the same system for consolidation and close is also capable of hosting your granular operational data, it can save a lot of time in waiting for answers, so when queries arise, you can drill into the specific area where it has arisen, and immediately get the information you need. 

6. Set goals - and always look to improve 

“We want team members X and Y to spend no more than 5 days each month on routine reconciliation, consolidation, close and reporting tasks.” 

Set an ambitious target such as this, and then explore what technical and workflow adjustments will be needed to meet it. Post implementation, review your processes on a regular basis to see what further improvements can be made. 

MHR specialises in helping finance departments improve their processes, implement the best possible solutions to meet their ambitions, and reduce their transactional burden.