By Jacquie Fossett
For years accounting departments have strived to be more efficient with their close process. Is your company where it needs to be or is it time to get serious about creating efficiencies? Monthly financial statements serve as an incremental snapshot of a company’s financial health and provide a baseline moving forward. Making sure these figures are accurate and timely is imperative to properly implementing an organization’s strategic plan and adapting to changing markets.
Equipping organizational leaders with current financial data as well as observations and insights can help them make informed decisions to gain a competitive advantage and mitigate potential risks. Recognizing the challenges of a company’s accounting department and identifying inefficiencies is critical to ensuring the data informing decisions is accurate and timely.
Close Process Challenges
While accounting departments have long tried to decrease their close process length, the amount of available data, multiple operating systems, as well as the fast pace of business change continues to put strains on the timing. Compare this with best-in-class close processes where what used to take up to 10 business days for a complete close process (including consolidating and reporting), is now expected in 3–5 business days by many enterprises.
As production floors become more agile and streamlined because of technology, automation, and improved workflows, similar expectations are being placed on accounting practices. Some executives ask, “If I can easily extract data from our production systems, why can’t I get my financial statements faster?”
Adding to the complexity is increasing regulation, including new revenue recognition standards, that are complicated and heavily data dependent. This is putting more pressure on firms to reduce close times and demonstrate that their books have solid internal controls around the numbers and reflect accurate information. Without proper tools and support, however, the ability to rise to these and other challenges becomes difficult.
Identifying Close Management InefficienciesEfforts to keep up with these challenges can place additional work on already stressed accounting departments. This increased pressure may detract from best practices in the close process and drive inefficiencies such as disjointed communication, delayed development of material estimates, bottlenecks, and late journal entries. The resulting delays in final numbers limit the ability for effective analysis and research, increases the likelihood of mistakes and late reports, and hinders companies from course correcting on a timely basis.
Inefficiencies also result from underutilization of new technology capabilities as well as the use of multiple platforms and legacy systems that require manual manipulation to incorporate large data sets. Slow or inefficient adoption of technology limits the efficiency of the close process, increases the chances for errors, and makes it difficult to keep pace with competitors that are properly leveraging technology solutions.
How to Improve the Close Process
The data and insights that come along with an efficient and effective close process bring value to an organization. When there’s a rush to close out the books each month, it leaves little time to actually analyze the data and provide recommendations for changes moving forward. Using a single technology solution can improve accuracy and make the process more efficient by automatically entering transactions into the general ledger without data manipulation, big Excel spreadsheets, or pivot tables.
One such single-solution software is Microsoft Dynamics 365, which brings CRM and ERP capabilities together to work seamlessly across sales, customer service, field service, operations, and more. It can automate journal entries throughout the life cycle of the business process—such as procure to pay, order to cash, and record to report— as well as streamline sub-ledger and bank account reconciliations. Close process checklists can be set up, and communication tools such as email alerts can be generated to provide automatic reminders—keeping everyone on pace, accountable, and following established workflows.
Rather than manually slicing and dicing large sets of data, making corrections through late journal entries, and spending time on cumbersome reconciliations, an ERP can automate the process and remove bottlenecks. What may have taken several days to accumulate, reconcile, and record can often be cut down to only a few hours, allowing extra time to be used for analytical review, obtaining insights, and developing strategic next steps for greater success.
People Still Make the Difference
It takes more than technology. Having a financial team that eagerly embraces a continuous improvement mindset is the backbone of any successful ERP implementation. When adopting new technology, be sure to get insight from those who will use it, and provide them with continuing education to develop their leadership skills and foster an environment that encourages innovation. Leverage their innate desire to feel a sense of accomplishment and drive results.
At Wipfli, we know that technology is only as good as the people who use it and the people who partner with you to provide a solution. That’s why we not only help clients implement their ERP system; we also do reviews, provide training, and help continually assess how we can create further efficiencies and adapt to changing business climates. To talk with an ERP expert, reach out to us today.