Part 18 of the Continuous Accounting blog series. You can access the full series here.
Now that you understand the concept and benefits of Continuous Accounting, where do you start? What are the right steps to take with your accounting and finance teams?
Continuous Accounting is not a “one and done” type of project, but rather a mindset and a journey for ongoing continuous improvement.
This journey, like any other corporate initiative, requires a structured approach with a methodology that’s supported by people, process, and technology. It must be manageable, with clear but realistic objectives.
Here is a four-stage, incremental approach to help you develop an action plan. As you explore these four stages, keep in mind that requirements, pain points, quick and big wins will be unique to each organization. This is a framework so you can work with your teams to determine the best path.
Some of the questions you need to answer are, “what’s the target?” and “what value will meeting the target deliver?” From here, map your existing processes, including key dates and durations, to identify the critical path and inevitable challenges.
For example, you could look at the time it takes to submit packages from reporting units, the time to complete the consolidation process, and the time to announce the final consolidated figures.
A thorough diagnostic that clarifies areas of strength and weakness should be completed, encompassing the end-to-end process across all key dimensions. Benchmarks against internal and external performance and reviewing best practices can also provide valuable insight.
Finally, be sure to gain senior sponsorship on project objectives and all of the resources you need. This is key to success.
The second stage is the implementation of your quick wins. These serve to produce almost immediate timetable reductions, demonstrate that time savings are achievable, and put people into a positive and determined frame of mind for delivering the bigger wins.
The key here is to understand that not all of the barriers to the financial close require huge amounts of effort – in some cases, you can easily make very significant gains, provided your consolidation solutions are robust and flexible enough.
The trick is to evaluate the options open to you. Prioritize them according to the amount of time and effort needed for implementation, and how significantly they will impact your close cycle. Those with the least required effort and maximum impact are the most attractive and should be your quick wins.
Here are a few “quick win” examples:
- Electronic closing scorecards which provide visibility into closing tasks
- Reviewing intercompany reconciliation processes to take them off the critical reporting path
- Automating account reconciliation and attestation of balances for audit purposes
- Reducing the time, risk, and cost of regulatory disclosures
Assuming that alone, quick wins can’t lead you to achieve all of your targets―or you’re unable to implement them given your current systems―it’s time to move on to the big wins. These require greater resources and more time, but often lead to big reductions in the close process.
Here are some “big win” examples:
- Implementing new consolidation software to provide a sustainable infrastructure for a fast close
- Establishing a new reporting framework to provide a broader range of possibilities and greater depth of analysis
- Replacing manual data entry processes with direct integration between source ERP or GL applications and enterprise performance management applications
- Developing a framework to monitor and control the entire close process
Post-Project Review & Continuous Improvement
A key consideration – and the final stage in the action plan – is continuous process improvement. Once you have identified Continuous Accounting as a priority, each time you review a process or supporting technologies, do so in such a way that continues to support and challenge the close process.
It is important to note that the benefits don’t have to stop at the financial close. Much of the learning can be applied to other key processes. You can apply the same type of methodology – challenging the way you do things, taking a holistic approach, and leveraging technology – to other tasks, such as planning, budgeting, and forecasting.
The Many Benefits of This Approach
Continuous Accounting promises to continuously improve the accounting and finance function. CFOs can assess the effectiveness of the accounting process by measuring the time it takes accountants to close the books, or track the number of errors that happened during the period. Such insights can guide more refined accounting and finance practices going forward.
By providing the means to work at a more measured pace, Continuous Accounting can also help improve the work-life balance for company accountants. And this additional time can be used more effectively, in ways that add value for the CFO.
As Tucker says, “A more systematic approach to accounting frees up the accountants to contribute to the strategic goals of finance leaders with value-added analyses of financial performance. This was impossible before, given their time constraints.”
Read this ebook to learn how to unleash your accountants to focus on value-adding activities.