Regardless of your industry, making the financial close a non-event – faster, more accurate, less stress – has long been the utopia of CFOs everywhere. And there’s good reason for that. Consider, for example, how much cost you would save by shaving even just one day off the time it takes to close the books.
Research into the financial close by analyst Hackett Group shows that top performers close their ledgers earlier in the month and complete the process in less time than others in their peer group. This saves money and allows them to free up resources to conduct analysis and provide financial and other company executives with support for fact-based decision-making.
When it comes to the ‘how’ of making the close a non-event, many customers we speak to see automation as the solution, but they don’t always really know what the problem is they’re trying to solve. Turning the close into a non-event is more of a mindset than a box to be ticked. However, many organizations simply don’t know where to start when it comes to turning it into some form of tangible reality.
You need an end game and long-term strategy in mind. The trick is to automate with purpose. Automation isn’t an objective in itself. Of course, it can help you achieve cost savings and some process efficiencies but to really transform finance and reap the benefits, you must first identify the manual processes that take up so much time and rectify any inefficiencies downstream so that they can, where possible, be eliminated at the source.
If you really want to make your close a non-event, don’t try to eat the elephant in one sitting – take one bite at a time. In other words, the starting point must be to quantify the benefits you would likely achieve for each day you are able to slash off your close timetable. For most companies we’re talking about cost savings, revenue growth through better insights and analytical capabilities for example, and improved shareholder confidence. In practical terms that involves breaking the problem down into practical steps and ensure they tie in with the wider organizational strategy and goals.
Then start by going after the low-hanging fruit, for example, labor intensive and frequently occurring activities such as journal entries. Up to 80% of the effort of journal entries is around data collection, formatting, calculating and creation of the journal, all of which can be automated. Once you’ve proved the concept, you can expand automation to other financial close activities. But your longer-term objective should be to identify the upstream root causes for your manual grunt work – for example, manual journal entry, balance sheet reconciliation or intercompany reconciliation – so you can streamline the process and automate as much as possible.
Against the COVID-19 pandemic backdrop, the business and economic environment in which we all now operate has undoubtedly presented huge challenges to organizations, but it is also proving a catalyst for positive change. According to research by HfS, most enterprise clients are already feeling the need to change business priorities with almost a third seeing emerging opportunities. The majority (82%) of initiatives focus on restructuring; moving workflow into remote environments, while there has been a 57% increase in designing new ways of operating in this environment to get ahead of competition.
This is no longer about stopping the bleeding, it’s about longer-term strategic gain and capitalizing on new opportunities, new ways of working and the need for finance to be agile. It’s about identifying how business can turn the new ways of working forced upon it by a global pandemic into competitive advantage. This is an opportunity to change how enterprises do business and to reevaluate how they operate. Making the financial close a non-event by means of finance automation is part and parcel of that shift. Not doing anything simply isn’t an option.
Find out how to transform your finance processes and make your close a non-event with Redwood’s Finance Automation