Digital platform solutions are enablers for better close processes
The financial close process is a crucial part of any company’s operations, as it generally involves large teams completing all financial transactions and the preparation of financial statements that are needed for important stakeholders like investors, banks and suppliers. However, despite its importance, the financial close process can be fraught with challenges and difficulties.
In a recent poll we asked what the main challenge is for finance and reporting professionals during the “busy season”; the busiest financial close process of the year. It turned out that the manual and time-consuming nature of the close process and tight deadlines are the main struggles that teams face. This can be especially challenging for businesses with multiple locations or those that operate in multiple countries. A high manual workload takes a lot of time, can be prone to errors, and is hard to keep track of, resulting in deadlines not being met. Other challenges include the lack of timely and accurate information due to a variety of factors such as poor communication and collaboration between departments, incomplete or missing data, and outdated systems. This can lead to further delays in the financial close process and errors or inaccuracies in the financial statements.
To address these struggles, many companies must properly understand the financial close process in order to standardize and document a clear and consistent process for the close. This can include the use of standard data models in finance systems, checklists, templates, and standard operating procedures (SOPs) to ensure that all necessary steps are taken and that all relevant information is captured. This can also help to improve communication and collaboration between departments, and can help to identify areas where additional resources or support may be needed.
During the standardization phase, companies can already start automating with digital platform solutions, or implement such solutions later. Automation improves the financial close process as it can help reduce errors, increase collaboration across teams, increase efficiency, increase visibility, and improve the accuracy and completeness of financial statements. This can be done through the use of software tools such as enterprise resource planning (ERP) systems, financial close management software, and cloud-based reporting and compliance solutions.
In addition, regular training and education for all employees involved in the close process is needed. It can help to ensure that everyone is aware of their roles and responsibilities, and can help to identify and resolve any issues that may arise. Finally, having a good monitoring system made up of clear and proper policies & procedures, controls and monitoring reports is important to ensure good functioning financial close processes. Digital solutions can also help companies with this.
Hence, the financial close process can be challenging, but digital platform solutions enable a better process, coupled with good documentation of the process and reporting models, regularly trained employees and good monitoring system with strong controls.
By the way, many companies still use the term “financial close process”, but new ESG reporting requirements like the Corporate Sustainability Reporting Directive (CSRD) are rapidly changing the financial close process. The CSRD significantly expands on existing disclosure requirements in such a way that more companies will be required to report sustainability information, and report on more topics and in more detail than ever before. Companies will need to redefine their current close process so that it also effectively and efficiently captures more accurate and complete non-financial information.
Strong digitally-powered financial close processes will most likely have the power and agility to adapt and deliver on the new ESG reporting requirements so that companies remain compliant with happy stakeholders that have fast and reliable insights and reports that are the result of a strong digitally-powered “close process”.
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