Faster financial closing
Regardless of a company’s size or financial sophistication, the financial close process can become convoluted. Sequential steps — from recording transactions to generating financial statements — must be done efficiently, collaboratively, and accurately before accountants can close the books on the current fiscal period. Fortunately, there are ways to make this recurring process more manageable and give financial teams and stakeholders the time they need to conduct analyses and make strategic business decisions.
The financial close process, by its nature, can be difficult. Even small businesses may have dozens of accounts to track and reconcile, and it only gets more complicated as firms grow. International enterprises and companies with highly dispersed finance teams have their challenges.
Here are six of the top financial close challenges:
Need for speed: When it comes to the financial close process, tension exists between getting the job done fast and getting it done right. The more easily accounting teams can access key financial data, the faster they can close the books.
Poor-quality or missing data: Whether it’s duplicate data, unrecorded payments, missing invoices, simple typos, or calculation errors, finding and resolving inaccurate or incomplete data costs time and effort.
Disparate systems: It’s not always easy to track down all the necessary information and ensure all transactions from every business department have been accurately recorded in a single business location. Further, businesses with multiple operating entities typically use local accounting systems, and those may not integrate well at headquarters. For example, different locations may use different versions of accounting software or even wholly different systems. The greater the number of local instances, the more likely integration issues may arise, caused by inconsistent or inconsistently applied charts of accounts and other formatting disparities. International businesses with multiple locations all over the world and in different time zones can experience even more challenges, especially in the absence of strict schedules. Disparate systems can increase the likelihood of error, and increase the number of closing issues, which reduces the efficiency of the accounting staff — and all of which can ultimately delay the production of consolidated financial statements.
Remote teams: Like data, accounting teams can be scattered and working remotely. Some teams closed the books virtually for the first time in 2020 and found a few key strategies helped make their remote closes go more smoothly. These included effective collaboration systems, mapped-out processes, and solid security practices.
Human error: For many accountants, a combination of high-pressure deadlines and repetitive tasks makes the closing process one of the least enjoyable aspects of the job. For example, accountants might spend hours or even days doing little more than transferring numbers and double-checking calculations — with the risk of mistakes increasing the more, the financial close process relies on manual data entry.
Under-supported teams: Some organizations lack the time, systems, and/or staff to work on a continuous close and are stuck with manual processes, antiquated batch systems, and paper documents. Inadequate support can lead to a vicious cycle that takes more time and manpower and still results in untimely information that is of little value. In turn, some companies resist investment in what has been seen as useless information and the process that supports it. The impact on accounting employees is significant and adds to the likelihood of errors as workers might purposely or unintentionally skip important steps just to get them done.
Common challenges to financial closing:
Lack of automation
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