At the end of every month, a business needs to review its accounts to ensure it has properly recorded and reconciled all of the transactions that have taken place during that specific month. This helps to ensure all accounting data is organized, accurate, and complete.
Novel technologies have allowed for massive transformation of corporate finance departments and their processes. When it comes to the financial close process, the greatest struggle of the finance department is the obtainment of high quality data. Inaccurate or incomplete data elevates the risk of errors in financial reports. Modern software such as DataRails can help with this.
According to Pymnts, for years, the enterprise resource planning (ERP) system has operated as a critical source of data for processes like the financial close. But platforms that store information, whether it be an ERP system or an Excel spreadsheet, were not built for reporting purposes. Further, these portals rarely contain all of the data necessary for a complete view of corporate financials. It’s only once all these numbers are brought together that you can go about the monthly close process.
Complexity, disparate systems, and lack of investments in infrastructure all have the potential to bog down monthly close processes, but there are things you can do about it. Below we outline three ways you can go about improving your monthly close.
Move away from manual creation of financial statements
The typical process for the creation of such reports involves a lot of cutting and pasting. Take last month’s report, “save as,” find-and replace to update the closing time and date, and so on. From there, users tend to copy and paste data from the current period to the prior period, updating the current period data accordingly.
Information is typically accumulated manually from a bunch of different sources such as balance sheets, income and expense account information, and general ledger data just to name a few.
This approach is inherently problematic. First of all, it’s difficult to keep track of multiple versions or to know who changed what, and when. Inevitably, a number changes at the last minute — causing a ripple effect in which the whole document must be reviewed to ensure that the number changed in all other instances.
The best way to move away from manual creation of statements? Implementing automation.
Automate as much as possible
Automation brings clear benefits to the close process in terms of efficiency, transparency, and speed. In finance organizations that are lacking automated capabilities, tasks are often delayed simply when a key member of the team is on vacation or out sick.
For finance leaders looking for ways to build more automation into their processes, typically the place to start is often with mundane, repetitive tasks — areas where it’s relatively easy to make a noticeable impact quickly. This can include allocations or calculations such as depreciation.
With DataRails, finance professionals can benefit from automated data consolidation as well as automated data transformations such as FX conversions, eliminations, hierarchies, financial adjustments, and more.
Today, tasks like these may largely be handled by manual spreadsheets, which are shared, updated, re-shared, and re-updated continuously. But why go about these processes manually and one-by-one when you have a platform that can automate them?
Automation allows your team to get things done faster, while simultaneously lowering the chances of having errors in your output.
Use real-time data
Would you say that your team is frequently surprised at month-end?
If this is the case, you’re not alone — many finance organizations only have access to accurate data at the end of the month, following the massive push to upload data into the network of systems that feed into the closing process.
But if you’re looking to optimize processes, you really shouldn’t be waiting until month-end for access to numbers. Business decisions don’t wait until the end of the month- the C-suite makes executive decisions continuously, not just during the month-end close.
Instead, make a push towards consistently using real-time data. The best way to do so is by leveraging technology, especially when multiple, disparate systems are used in the close. DataRails is one such system that provides you with real-time data that is consolidated automatically from all your organizational systems.
Businesses can make significant progress in reducing the time it takes to gather, verify, and report enterprise-wide financial data through the use of real-time or continuous close technologies.
Improving the close process will improve business operations
It’s important to keep in mind that executives utilize the information provided during the month close to run the business. Therefore, the sooner they see accurate numbers the better. Moving towards automation and real-time data will help the c-suite consistently work with accurate figures to determine the health of the business and guide decision making forward as best as possible.
