As a business solutions professional specialising in the needs of the Office of Finance, it occurred to me there’s a common thread in almost all of my conversations with prospective customers. That is, CFOs bemoan the amount of time it takes them to close the books and the manual effort required to produce timely, insightful financial and management reports.
Sometimes these are explicit statements, but just as often they are symptoms of other systems and process issues they are raising with me. Sometimes it may just be a case of not seeing the forest for the trees, or coming from out-dated, old school thinking.
So why is the fast close still such a topical issue in 2013? Have we made no progress?
As an example, just the other day I observed the payment process at an organisation where supplier invoices that had already been coded, approved and processed for payment in the finance system still incurred a final manual check of physical invoices [thousands of them]. Is this a crisis of confidence in the well-established software system, or a lack of appropriate controls/auditability (perceived or actual) at every step of the process? How many times does an invoice need to be approved?
There’s nothing new about this focus on a finance department’s ability to close the books and report quickly after the month and year end. But the fast close has now become the foundation for enterprise performance management, in which companies compare their actual performance against targets and analyse for improvement. The value of such insights, and timely decision making, absolutely relies on the fast close.
At Professional Advantage, we help our customers implement systems that significantly reduce their ‘waterline’ via business process excellence, providing them with the tools to provide value-add analysis and decision support for the wider business.
A modern financial management system should eliminate reconciliation points, double handling and manual intervention. All financial transactions should be ‘single touch’ data entry or import, with straight-through processing (including future periods and automated accruals/reversals). All data should be automatically validated via system based business rules, which also improve efficiency.
I recently read an excellent article on the UK-based FSN website, a resource for finance professionals on business systems and analysis. Fine Tuning the Fast Close builds on the theme and provides a similar, but different perspective on this topic.
Consider your end-to-end business processes for opportunities to improve with joined up thinking:
- Compliance to strategy
- Procure to pay
- Contract to collection
- Service to bill
- Planning to performance
- Analysis to action
All of these processes and achieving the fast close are underpinned by:
- Single source of truth – i.e. confidence that comes from quality data, system derived information, full audit compliance & visibility.
- Automated processes and systems integration – i.e. speed and efficiencies from fast turnaround, rapid answers, shorter processing cycles, reduced reconciliation and elimination of manual double-handling which introduces greater risk of error.
- Employee & partner self-service – i.e. participation of the broader business, not limited to Finance, managing business processes from their inception and applying controls so you don’t spend vast quantities of time fixing other people’s stuff.
- Basis or business context – i.e. what are your business drivers, best practices (financial, industry), external influences or constraints (e.g. competition, regulatory).
I’ve personally been involved with several customers who took their end of month process from 20+ days down to 3-4 days. Once you’ve got accurate data and streamlined processes, the fast close should be your new reality.
We’ve also reduced their production of report packs from several days to just a few hours. System generated reports, not manual intervention and data manipulation.
Annual budget cycles have been reduced from 3-4 months down to 1 month for a number of customers, eliminating spreadsheet complexities and improved accuracy at the same time.
The fast close relies on mastery of data management, embedding an effective control environment, using relevant collaborative technology and giving the finance function end-to-end visibility of the process. Done well, the final mile of financial reporting cycles need not be so fragile. It should be less reliant on manual intervention and fixing data, freeing up time for more value-add performance management and decision support.
You can read more about Professional Advantage and financial management & ERP here.