August 18, 2021

Making the Case for Automating the Close

6-minute read

There is a longstanding agreement on the importance of a company closing its books as quickly as possible. A short close becomes all the more important during periods of business disruption and uncertainty because it allows an organization to accelerate financial and management reporting and frees up resources to prepare more extensive and impactful analyses.

Companies that close faster have timelier financial and managerial information. Ventana Research’s Office of Finance Benchmark Research found that 62% of companies that close their books within six business days have timely information, compared to 39% that take seven or more business days.

Making a successful business case for investing in software to increase automation in the close requires more than simple calculations of costs and benefits. It can be difficult to quantify the exact value of being able to act a day sooner to address an issue or opportunity.

An effective business case must educate decision-makers and build awareness of the issues that prevent a faster close and the value of addressing them. In particular, senior company and finance department executives must be convinced that the dangers associated with the change are low and the risks of not acting immediately are high.

These executives may not fully grasp what causes the process to take too long or be too labor-intensive. They may not be aware of the intricacies of all parts of the process, from pre-close activities to reconciliations and postings. Viewing the close process from a distance, they likely do not see the numerous small inefficiencies that bog down the close and increase risk.

They also may not realize the degree to which the process can be automated. In short, be sure to take care of the marketing and selling of the business case before presenting the numbers.

There are three main steps to building an effective business case. First, address the people issues. Explain how a faster close supports the objectives of key decision-makers to secure executive sponsorship for the effort. Second, determine, document, and present the full scope of qualitative benefits that can be achieved through automation and explain their impacts on the decision-makers and the company. Third, construct the financial aspects of the business case, laying out the costs, quantitative benefits, and the risks in achieving these numbers.

Address the People Issues

Begin by identifying the key decision-makers and understand which of their objectives intersect with the benefits the deployment will deliver. Some in Finance may want to cut costs, others want to reduce risk. Corporate executives will value getting information sooner, and a shorter close not only achieves that, but it also frees up capacity so staff can expand its ability to support operations with the information they need to consistently make better decisions.

There is more time to craft disclosures and filings for investors, lenders, and regulators. Whatever the specifics, identifying and focusing on their objectives will help identify the goals of the investment as supportive of their needs.

Recognize that having an executive sponsor is essential. Aim for someone at a high level who is influential but understands there can be a trade-off between seniority and commitment. Enlisting multiple sponsors from groups that will benefit (for example, internal audit, financial reporting, compliance, and accounting) is always useful and may be necessary.

Define the Benefits

Simply stating that when it comes to the close, faster is better may not be enough to motivate change, particularly when it comes at a cost. Be sure to enumerate—and, where possible, quantify—practical benefits that decision-makers recognize.

Every organization is different, so it is useful to present the case in the specific context of the company and its challenges. But in general, the most valuable benefit is time.

Our research correlates the speed with which a company can close with the degree to which it has automated the process. The single most important benefit most frequently cited (by 34% of research participants) is having more time for analysis. Almost as many (27% each) cited providing financial and management information as soon as possible as a benefit of a faster close.

A shorter close and greater capacity to provide analytical insights give the department greater opportunity to provide actionable feedback to executives and managers, enabling them to react more effectively to issues and opportunities that are revealed in the numbers.

Unfortunately, quantifying the value of greater organizational effectiveness that will be gained is much more difficult than an easily demonstrable direct cost savings, so to justify the investment, it is important to present the return on investment in terms of overall value: “What’s it worth to have the numbers sooner?” or “What would it have been worth to us if we had been able to act one or two days sooner when our competitor made their move?”

One way to quantify the benefit is to estimate the number of full-time equivalents or temporary accountants that would be required to achieve the same result going forward. It is likely that an investment in automation is far less expensive.

Also take care to communicate the benefits effectively. Building awareness can take time. It may be necessary to begin an educational campaign well in advance of presenting the business case.

Use independent research to validate the need for a faster close, the objectives of increasing automation, and the benefits it will bring, including risk reduction.

Document the Investment Thesis

A formal business case consists of seven main sections:

  1. An executive summary
  2. A problem statement
  3. A situation analysis
  4. Solution options
  5. A project description
  6. A cost-benefit analysis
  7. Recommendations

When creating the document, keep in mind these key points:

  • Be complete but succinct
  • Structure and focus the content to address the interests, concerns, and needs of the decision-makers
  • Be sure to follow the organization’s methodology for the quantified parts of the case

State assumptions clearly and concisely with details in appendices. A complete, well-crafted business plan can go a long way toward securing an investment in automating the close. Use it to help persuade key people who approve purchases and show that there is something for everyone in doing this.

Join Ventana Research and a BlackLine customer for this webinar as they explore the value of close automation, especially for evolving and growing midsize organizations.

Robert Kugel, SVP & Research Director at Ventana Research

Modern Accounting