August 11, 2021

How to Choose a Financial Close Solution

 

Let’s face it—traditional manual accounting processes are unsustainable. They take up too much of your valuable time, introduce unnecessary risk, cost your business too much money, and negatively affect employee morale.

You’ve likely reached a boiling point with your current close processes and it’s time to evaluate how to add more efficiency, visibility, and control over your day-to-day accounting and finance operations. While technology is the easy answer, narrowing down your options among a myriad of technology vendors can be difficult and even confusing.

Before we discuss further, let’s define what the financial close is and preview what technology can bring to the table.

What Is Financial Close Software?

First, the financial close is a process whereby accounting and finance review and reduce account balances before the accounting cycle closes. The process includes recording and reviewing journal entries for each transaction and activity, reconciling high-risk transactions, and validating the data through balance sheet review and account reconciliations.

Typically, this process is performed manually—forcing accountants to spend long days and late nights closing the books and leaving them with little capacity to focus on real-time analysis and insights.

Financial close software unifies, standardizes, and automates the close process so that discrepancies, errors, one-offs, and unusual items are automatically brought to light, taking up accountants’ valuable time to analyze and address them.

Instead of spending hours double-checking calculations, validating data, and handling it all by emailing, saving, and re-saving spreadsheets, accountants finally have the capacity to focus on the work they really love—like supporting strategic initiatives and driving operational improvements.

The best close management software is designed to make this a reality.

To find the right cloud financial close solution that fulfills your current business needs and can grow and adapt with your changing business landscape, be sure to ask your financial close vendor these four key questions:

1.      What value will we get from implementing a financial close solution?

2.      What is the ROI of adopting your system?

3.      Are controls and security of data built-in?

4.      Is the solution easily scalable if our business grows or changes?

The Value of Implementing a Financial Close Solution

Chances are each financial close vendor you go to will be able to speak to the value of their solution. But make sure you’re going a step deeper and asking how that value is generated.

If a vendor tells you they can cut your close time in half, don’t just take their word for it. Ask for proof—examples of customer success stories or a reference you can speak to. Ask how the technology works—a centralized repository or close status dashboard is great for visibility and collaboration, but it will likely only save you an hour or two. In some cases, adding a system can increase administrative effort and time if you’re still performing your work manually.

True time savings and added capacity come from automation. Your financial close solution should be able to automate both the simple (e.g. data extracts, zero balance reconciliations, etc.) and the complex (e.g. many to many bank reconciliations, task dependencies, journal entries, etc.). With true automation, the system is doing the repetitive work for you so that you have the time to focus on exceptions, review steps, and analysis.

Freeing up time also creates capacity for additional opportunities to add value such as becoming a become a better business partner, building a strong control environment, and attracting and retaining top talent.

Key takeaway: Take value and go a step deeper—ask for proof and gain an understanding of how the technology works to deliver value. Trusted peer review sites like G2 and TrustRadius are great places to start.

Focus on Return on Investment

Many organizations come to us with a sense of urgency during the evaluation process—perhaps your CFO is demanding that accounting and finance close on a predictable and regular cadence, or your auditors are requiring that you strengthen documentation by the next audit cycle (and they’re charging you more for overages). These reasons, among others, are why the quickest and cheapest solution can sometimes seem like the most attractive option. But instead of asking about speed and cost, ask your financial close vendor about overall return on investment.

A simple, centralized task list or accounting workflow solution is cheap and quick to implement, but will it pay dividends if it doesn’t connect to and automate the underlying work? If your accountants are still performing and tracking this work manually, what you saved in upfront costs is used up tenfold in overtime costs and inefficiencies.

Thoughtfully investing in a solution that improves and automates processes and workflows, saves accountants measurable time, enables faster and more accurate reporting, and redirects work to higher-value activities, will prove more beneficial and impactful to the accounting and finance team and the business at large.

Key takeaway: Don’t be intimidated by a higher price tag. Focus on widening the gap between price and added value.

Controls & Security Must Be Built-In

In a manual environment, controls can be an afterthought—or solely detective in nature. This results in time-consuming rework and subpar documentation. With any good close management solution, you want to make sure that controls are automatically embedded into your workflows. Sophisticated solutions will even help shift your controls from detective to preventative—catching errors and potential fraud before the period closes.

Relevant questions to ask your vendor are: How is evidence of preparation, review, and approval recorded in the system? What happens when an account goes out of balance? How does your solution mitigate the risks associated with overusing Excel? What features and functionalities do you have to help us shift our controls from detective to preventative?

Additionally, make sure your financial close vendor is committed to maintaining a world-class security infrastructure. This will help you gain buy-in from IT and will support a healthy and easy audit. At a minimum, your solution provider should achieve internationally recognized auditing standards, SSAE 18 SOC 1/2/3 Type II and ISO/IEC 27001 and 27017 certifications.

Lastly, beware of vendors that require you to use your own or third-party data storage system—creating an unnecessary headache for IT when integrations aren’t compatible.

Key takeaway: Controls are paramount—especially if your company plans to go public or engage in M&A activity.

Choose a Solution for Today & Tomorrow

Regardless of how easy a system is to implement, it still takes time and effort. And as the pandemic has demonstrated, business circumstances can change and evolve very quickly. Ideally, you will only need to implement a financial close solution once. Therefore, it’s important to select the right vendor—one that can both meet your needs today and exceed your expectations for the future.

Many point solutions only solve for your organization’s current state and require a huge amount of administrative work to incorporate more data sources or reconciliation use cases and add new entities. Ultimately, this results in organizations going back to the drawing board and evaluating more capable solutions all over again. 

Therefore, it’s important to ask the first time around: Is this all that your solution can do? What is the time and effort required to make changes or add features and functionality? If the vendor can show you their entire tech stack in the same preliminary one-hour demo—be weary.

Scalable financial close solutions have a carefully mapped out foundation or starting point and multiple fully contemplated growth paths to accommodate any additional business needs.

Key takeaway: In the next year, five years, or ten years do you picture your business and your team looking the same as today? The likely answer is no, so make sure the technology you choose today can accommodate tomorrow.

Check out G2's Financial Close Software Grid to evaluate leading solutions for modern accounting based on peer-review data.

Sonia Chu

Future of Work