The financial close is a necessary but time-consuming process for companies of all sizes, from all sectors. During the financial close, a company’s accountants will verify account balances and create financial reports to give an accurate impression of the business’ financial standing. The task takes up a great deal of time and money and must be repeated throughout a company’s lifetime.
In today’s digital economy, time means money. The Journal of Accountancy found that 87 percent of financial professionals work overtime during the financial close process, demonstrating how inefficient current procedures are. Although many companies have begun to embrace digital transformation, in many cases this has not yet reached finance departments, which remain reliant on disparate legacy processes.
Rather than wasting time and money on tedious, manual and error-prone processes from the last century, it’s time to bring the financial close process into the digital age. With the right technology, such as Adra by Trintech, companies can ensure their financial close is conducted quickly, effectively and with reduced risks, leaving finance teams free to provide the strategic insight needed to achieve growth.
As well as a lack of visibility over numbers and performance, manual processes carry a higher risk of human error
CFOs must contend with a growing number of challenges, including assessing and mitigating financial risk. To do so using manual processes, such as going through emails, spreadsheets and paperwork, is ineffective.
As well as a lack of visibility over numbers and performance, manual processes carry a higher risk of human error, with potentially serious consequences. Mistakes can be costly, both for a company’s finances and its reputation.
Here are five ways intelligent software and automated processes can improve the financial close process:
Reduce the people involved
The more people that are involved in the financial close, the more opportunities there are for error. This can be seen in the old processes that many companies are still using to complete their financial closes.
According to Accountancy Age, only half of CFOs trust their numbers and 78 percent of finance directors are under pressure to close faster. Adopting record to report (R2R) automated processes not only reduces the number of people involved, but also improves the quality and reliability of financial data that is collected, removing some of the time pressures.
Put everything in one place
Collecting evidence and documentation during the financial close process has traditionally been a laborious task. Using dedicated financial close software, accountants can deploy standardised workflows across their company, enabling even inexperienced team members to follow intuitive guided processes to collect information for a financial close and risk assessment.
Automating this process delivers operational efficiencies and reduces the risk of supporting documentation being missed, figures being transposed incorrectly and other common problems found within legacy processes.
Increase transparency and visibility
When companies conduct their financial close manually, they can’t be sure if there have been missed tasks, data entry mistakes or misstatements until they reach the end of the process. With an automated approach to the financial close, companies don’t need to wait as long – they can catch an understated expense receipt before auditors come calling and achieve up to a 47 percent improvement in visibility, according to Trintech’s 2019 report, The Business Case for Automated Balance Sheet Reconciliations. This brings a major boost to planning organisational change in advance.
Financial close software will automatically document every step taken, producing a crucial timeline for compliance and audit checks, and removing the costs of human error.
When companies conduct their financial close manually, they can’t be sure if there have been missed tasks, data entry mistakes or misstatements until they reach the end of the process
By using process automation during the financial close, organisations can create logical steps that execute elements of the workflow with precision. Once processes are correctly automated, they can be designed to occur in the same way every time.
With staff freed from time-consuming processes, they are able to refocus their attention on analysing the close. Meanwhile, CFOs and finance directors can focus on adding real value to the business.
As more comprehensive compliance laws place greater strain on companies, leveraging technology for the financial close process will make it easier for businesses to meet their obligations. Automated R2R technology enables companies to create a full audit trail, granting internal and external auditors knowledge of workflow, priorities and emerging risks.
While the financial close will always involve a risk of errors, technological developments have made it easier for accounting professionals to mitigate risk. Financial close software goes far beyond the old methods associated with planning programmes.
No matter how capable finance and accounting teams are, without integrated technology, it is difficult to close quickly, efficiently and without risk. With automation, departments are beginning to realise that technology can make the financial close an easier and more effective task.