We’re entering a new era of finance transformation, and forward-thinking businesses have strategies that are focused on how to move faster, be more responsive, less manual, and more transparent.
But tackling strategy is often futile without reinventing the core first. Through orchestration, automation, and managing data integrity, organizations can reduce resource overhead and improve data quality and cycle times in the financial close.
Leading accounting and finance organizations are transitioning into a more analytical function and partnership role by building their business plan around three pillars: Close Process Transformation, Process Automation Transformation, and Integrity and Risk Transformation.
Executing each one of these pillars is vital to maximizing the reduction in transactional processing in accounting, which Accenture predicts can be reduced by 40%—with the right combination of people, process, and technology.[i]
Close Process Transformation
Too often, the close process is run by gut, instinct, and collective knowledge, versus a defined, centralized, and orchestrated workflow and process. With so many people involved and mounds of spreadsheets constantly accumulating, roughly defined processes are often different, from geography to subsidiary. Collaboration remains stubbornly stuck in email and conference calls, with limited visibility into the process.
When you take a look inside top performing organizations, it’s immediately evident that they do things differently ― and it’s time to take a page from their playbook.
The key to their success is clarity. Each stakeholder in their organization has a clear perspective of what must happen at each step, when it must happen, and what it depends on. They’ve created a clear set of roles and responsibilities and have management-level reports that give visibility into the global close calendar.
Milestone tasks are in place to guarantee the correct sequence, flow, and rollup of related activities. Automatic notifications are set to warn stakeholders of pending tasks and to give management a heads-up of overdue tasks and bottlenecks. And a set of internal controls is established to reduce material risk while eliminating unnecessary controls that stand in the way of a fast close.
As a result, they can close and report, on average, twice as fast as their peer group.
Process Automation Transformation
It’s no secret that manual tasks drain accounting and finance efficiency, and those tasks continue to top most accounting surveys as the biggest challenge to achieving a lean close. The issue often causes associated frustrations among accountants ― frequently the most talented ones who aren’t using their skills appropriately, and are instead performing repetitive work.
Typically, accounting organizations have significant manual overhead in several areas. This includes the operational areas of accounting, such as billing and collections and accounts receivable, and within the close and general accounting areas, such as journal entries, account and transactional reconciliations, and intercompany transactions.
Best-in-class organizations are, however, substantially leaner than their peers and able to reallocate their costs towards strategy. A key enabler for them is leveraging process automation at various levels within the accounting team.
Integrity and Risk Transformation
Creating trust and continually keeping pace to minimize reporting, regulatory, and strategic risk is the final pillar of finance transformation. Through strong automation, organizations can achieve better integrity, both in their balance sheets and in their controls. And those that invest accordingly have significantly more accurate financial reports and less resources devoted to trying to root out errors in the balance sheet.
While task management and automation improve speed and efficiency, data integrity perhaps provides the largest benefit, avoiding the organizational and professional exposure from an inaccurate filing or restatement.
Automation can also highlight transactions and balances that exceed control thresholds, while ensuring all reports can be reconciled back to the original data. Reconciliations, journal management, and revenue processes, like revenue recognition, can also be upgraded to become rule-based and as consistent as possible, backed by a strong record of corrections or adjustments and post-audit review processes.
The Foundation for Finance Transformation
An article in the Journal of Accountancy states that, “Regardless of company size or complexity, all successful financial close processes require continuous communication, comprehensive documentation, and a flexible, responsive organization. However, omitting one or two of these building blocks may result in some type of failure during a month-end close.”
Successfully navigating the path to finance transformation is dependent on building all three of these pillars, and your organization can only be as strong as the weakest one.
First, optimize your processes to reduce risk, improve accuracy, and increase efficiency in a way that benefits the entire accounting and finance function. Then, establish a solid foundation for each by investing in the right technology that will result in the biggest boost of overall productivity.
Finally, through automation, free your people to be more productive and help guide the business through planning, strategy, and analysis.
Learn more about the world’s most trusted solution for finance controls and automation.