MANY FINANCE & ACCOUNTING PROFESSIONALS DISSATISFIED WITH THEIR FINANCIAL CLOSING AND REPORTING PROCESSES ACCORDING TO RECENT SURVEY
Survey by Institute of Management Accountants Supports Value of Implementing Continuous Accounting Methodology
LOS ANGELES – Dec. 13, 2016 – BlackLine (Nasdaq: BL), a leading provider of Enhanced Financial Controls and Automation (EFCA) solutions that enable Continuous Accounting, today announced the findings of a survey by the Institute of Management Accountants (IMA) underscoring the pressures and difficulties most businesses confront in closing their books on time.
The BlackLine-sponsored survey of more than 750 financial executives, managers and analysts in the United States unearthed several key challenges in company financial closing and reporting processes. For instance, the survey indicated that more than two-thirds of the respondents feel under pressure to speed up the closing process, with 41 percent citing the time required to compile the necessary information to close the books as the top impediment to a timely close.
Forty-three percent of respondents spend more than half their time collecting, entering and validating data, resulting in a closing process that takes more than seven days on average. The top constraint identified was the ability to receive information like final sales data, time sheets, travel expenses and shipment data from other company departments in a timely fashion. Data accuracy is a chief concern, as well, with just 28 percent of respondents saying they completely trust the overall integrity of their financial close data.
“These constraints can be alleviated with integrated systems and automated processes,” the IMA survey report “Process Automation in Accounting and Finance” stated.
More than half (55 percent) of the respondents said that spending less time on closing cycles (as a result of implementing technology to automate processes) would liberate them to focus on strategic initiatives, and nearly a quarter (23 percent) said it would free them up to focus on more accurate and timely financial statements.
Most respondents (75 percent) track how long it takes to close the books, with larger firms (revenues above $100 million) more likely to track closing time than small firms (revenues under $100 million). Sixty-four percent of respondents also track how long it takes to produce their financial statements. The range was an average of 6.4 days, with a median of four days.
While the figures attest to the importance of reducing the time it takes to close the books and report the financial metrics, only one-third of the respondents thoroughly document their closing processes.
“Overall, these results point to the fact that about two-thirds of the firms either don’t document their closing processes at all, or do so for only parts of the process,” wrote the report’s author, Kip Krumwiede, CMA, CPA, Ph.D., IMA director of research.
A particular challenge in the closing process is the widespread use of spreadsheets. More than 61 percent of respondents stated that their firms were “highly dependent” on spreadsheets and 28 percent stated that they were “somewhat dependent.”
“The high dependence on spreadsheets is a bit alarming, given the risks and problems associated with spreadsheet use, including changing accounting standards, time required, input errors and spreadsheet cell linkages,” Krumwiede said.
The report concluded that many firms would benefit from a Continuous Accounting approach, shifting their closing activities to occur on a more frequent and regular basis across the closing cycle.
“Continuous Accounting is a methodology where those processes traditionally left for the month- or period-end are spread throughout the period more evenly, with the goals of improving accuracy, allowing more time for review and increasing efficiency,” the report stated, noting that Continuous Accounting creates a “logical progression from reducing the time it takes to collect and process accounting information to being able to provide information that will lead to more profits.”