It’s common for Finance & Accounting leaders to be asked “How many days does it take your company to carry out the monthly close?” However, the follow-up question not typically asked is “How painful actually is your closing process?”  The financial close continues to be one of the most critical and time-consuming efforts for the Finance & Accounting organizations at the majority of major corporations.  While variations in complexity and requirements may exist between companies for this important activity, most companies can greatly benefit from the application of automation and process improvement in this area.

A recent Peeriosity Peercast^TM in the General Accounting research area featured a global Shared Services organization that coordinates the financial closing process for approximately 450 legal entities in over 80 different countries, with a maze of cross-border intercompany and external transactions that further complicate the closing process.  Some of the major enabling changes this company used to create a global platform for the financial closing process include the following:

• Moved to a global chart of accounts in 2002
• Completed an SAP implementation in 2007, with one global instance
• Created accounting service centers also in 2007
• Implemented a standard close management system in all service centers in 2011-14
• Integrating currently into a Record-to-Report structure in order to improve process focus

This global platform change coincided with a series of process improvements, system improvements, and organization changes.   Some of those improvements in technology included:

• Runbook – Close task coordination and automation
• Data Integrity Checks – Cockpit provides visibility to transactional issues
• Combining Multiple Small Tools into Big Tools – Sustainable integration in SAP; reduces support costs
• Linked Document Archiving (LDA)
• Workflow Templates – Accelerating the implementation of workflows
• Business Warehouse – Fast, flexible reports that enable better analysis
• Knowledge Management – Global process library
• Disruptive Technology – Robotics, Artificial Intelligence, S4/HANA
  

The feature company also shared a similar level of detail regarding process improvements and changes to their organization during the Peercast.

There were two iPolling^TM questions associated with this Peercast.  The first question asked about the number of workdays required to close the books at month-end (excluding the preparation of management reports).  As shown below, the responses were fairly evenly spread across the answer key, with the 5-day close being the most popular at 28%, followed by 4 days (25%) and 3 days (19%).   It is interesting to note that 77% of the companies participating in this research close their books in five days or less.

The second poll question focused on what the biggest obstacle is for companies in reducing the length of the month-end close.  Particularly noteworthy is that the most popular response (24%) was that they had no major obstacle and were happy with the progress made so far in optimizing the month-end closing process.  This was followed closely by technology limitations (22%) and complexity in the company structure and/or chart of accounts (22%).

Some of the member comments associated with this poll include the following:

Energy & Utilities Member:  Our current efforts are not primarily focused on reducing days, but on reducing the amount of effort around manual accruals during the critical path of the close, and finding ways to leverage technology to manage accruals, and allocations, on top entries.

Manufacturing Member:  Going back before Sarbanes-Oxley there was much more pressure to close faster. At this point, there is not as much of a push versus review steps to ensure accuracy. Our leadership team seems happy with receiving the final numbers on Friday afternoon during the close week.

Non-Profit Member:  Within the last couple of years, we have reduced our close cycle from 9 days to 6.

Manufacturing Member:  We close individual legal entities by the end of WD3 and use the morning of WD4 to consolidate global results.

Manufacturing Member:  Our close is actually 2.5 workdays, with results due at Noon of the 3rd workday. Units east of the Eastern U.S. Time Zone get more time to close, while units to the West have less time.

How efficient is the month-end closing process at your company?  Would a more structured approach, similar to that of the Peercast feature company, provide further improvements to this critical process?

Who are your peers and how are you collaborating with them?

“Peercasts^TM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer Mail^TM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

“iPolling^TM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer Mail^TM, members can easily communicate at any time with others who participated in iPolling.