5 Steps to Unleashing Finance: Step 3 – Streamline the Financial Close

As a former accountant, I spent several years of my life back in the 1980’s working at a multi-national company where we spent 3 weeks of every month collecting trial balances from remote locations, consolidating the financial results, and generating reports for management and our parent company.  Of course, back then we were working with arcane technology – including faxed trial balances, Lotus 123 spreadsheets to handle currency conversions, and a mainframe GL for financial consolidation and reporting. Unfortunately, this lengthy process left only a couple of days per month for higher-value work, then it was back into another month-end close.  I felt like the proverbial hamster on the wheel.

Luckily the technology has improved quite a bit for accounting and finance staff here in the 21^st century.  But despite billions of dollars invested into financial systems, many still spend too much time on manual tasks required to collect, consolidate and report financial results each month.   This might be due to reliance on spreadsheets and email, or legacy CPM 1.0 applications that they have outgrown or that just don’t meet today’s business requirements.

Unleashing the True Value of Finance

Whatever the case, unleashing the true value of finance requires organizations to have efficient finance processes that minimize manual tasks, and free up the finance team to focus more of their time on value added analysis, and decision support for the organization.   OneStream recently launched a blog series highlighting our recommendation for the “5 Steps to Unleashing Finance.”

In the first article, we highlighted the need for a modern, CPM 2.0 platform as a prerequisite to unleashing the value of finance.  This means having a platform that unifies key finance processes, and provides purpose-built functionality for financial consolidation, reporting, planning, forecasting and analysis.  A CPM 2.0 platform integrates financial and operational data from multiple sources and provides a single version of the truth for actuals, budgets, plans, forecasts and analytical data.

A unified CPM 2.0 platform removes several barriers to finance productivity – such as having multiple applications to maintain and load data into, having to synchronize data across multiple CPM applications, and having multiple products to upgrade when a new release comes out.  With a modern CPM 2.0 platform in place, you’ll have a better chance of success in unleashing the value of Finance.  Here are the 5 steps we highlighted in the first article:

1. Know the business – Gather feedback from business partners and understand their key success metrics and KPIs.
2. Drive agility in planning & forecasting – Adopt dynamic forecasting processes that are less focused on a 1X event, such as the annual budget.
3. Streamline the financial close – Simplify tasks with automation; eliminate manual data movement, errors and risk, provide complete audit trails and visibility.
4. Automate reporting – Create self-service reporting for business partners, drive standardization and reduce risk.
5. Leverage advanced analytics – Consider predictive analytics or scenario analysis to enhance the dialogue with business partners.

In this article I’m focusing on Step 3 – Streamline the Financial Close.  Read on to learn some of the key techniques you can leverage to streamline the collection, consolidation and reporting of financial results and free up more finance time and resources for value-added activities.

Streamlining the Financial Close

Having an efficient financial close and reporting process provides several benefits to organizations.  For one, having an efficient financial close cycle frees up finance resources to spend less time on tedious tasks and more time on value-added analysis.

Another benefit of having an efficient financial close and reporting process is that delivery of financial and operational results to management can be accelerated. Having faster access to the results is a great way to accelerate decision-making.  A fast close also provides more time for review and analysis of financial results before reporting to external stakeholders – and the results can also be delivered sooner to external stakeholders.

Despite all the discussion in the industry and software investments , recent surveys highlight that the financial close is still a long slog for most organizations.  In fact, according to a 2017 study by Ventana Research, only 40% of organizations can close their books within six business days, while 60% take 7 business days or longer.  The bottom quartile performers take 11 business days or more.

So what’s the problem?  Having worked with many organizations over the past 20 + years on financial close, consolidation and reporting projects – there are several common bottlenecks that hold organizations back. A few examples are noted below:

• Collecting Data
• Intercompany Eliminations
• Account Reconciliations
• Tax Provisioning

Let’s talk about ways to overcome these key bottlenecks, starting with collecting data.

Automate Data Loading

Collecting and integrating data from multiple GL/ERP systems into a financial consolidation system can be a laborious task.  In many organizations, this data collection process is handled via flat files or spreadsheets being sent from remote locations to corporate accounting for loading into the consolidation system.  This manual process lends itself to errors which often require multiple emails or phone calls to resolve when the incoming data is incomplete or doesn’t map to the corporate chart of accounts.

By creating a direct connection between the financial consolidation system and the GL/ERP data sources, the data collection process can be automated and streamlined with exceptions being flagged and addressed quickly.

Automate Intercompany Eliminations

In my days as an accountant, I used to spend several days per month trying to reconcile and eliminate intercompany balances between companies, and I know this is a pain for many organizations.  By using an advanced financial consolidation application with automatic intercompany eliminations functionality, this process can be highly automated and streamlined to save time during the close.

Start Account Reconciliations Early

Larger enterprises can often have 100’s to 1000’s of accounts that need to be reconciled during the financial close process and before publishing their financial results.  Using account reconciliation software packages to automate this process can drive efficiencies, as can starting the account reconciliations process earlier in the financial close cycle.

With an account reconciliations solution that is fully aligned and integrated with the financial consolidation and reporting process, account recons can start as soon as subsidiaries submit their trial balances to corporate.  They don’t have to wait until the consolidated financial results are available and loaded into a separate account reconciliation software package. This approach can shave valuable days off the month-end and quarter-end financial close process.

Integrate Tax Provisioning with Financial Consolidation

An often-forgotten part of the financial close and reporting process is calculating and booking the provision for income taxes.  This step is often an after-thought, performed by a separate group and typically done in spreadsheets after the financial results have been finalized.  This approach can delay the finalization and publishing of financial results for a publicly-held company.

By integrating tax provision into the financial consolidation and reporting process, and by using a tax provision solution that is tightly integrated and aligned to the consolidated financial results, this process can be accelerated, and financial results can be published sooner.

Real World Examples

A growing number of organizations, across industries and across the globe have adopted CPM 2.0 platforms, such as OneStream, and have taken the steps required to streamline the financial close and reporting process and unleash the value of their finance organizations.    Here are some examples of the improvements several customers have experienced.

Data Integration: Xylem, a leading global water technology company, replaced multiple Oracle Hyperion applications with OneStream’s unified CPM 2.0 platform and were able to reduce data load times from 6 – 8 hours to 15 minutes.

Intercompany Eliminations: Curtis Instruments replaced Hyperion Enterprise and Excel with OneStream for financial consolidation and reporting and reduced complex intercompany reconciliations from 10 days to 3 days.

Account Reconciliations: AFL replaced Hyperion Financial Management and Blackline with OneStream for financial consolidation, reporting and account reconciliations.  Among other benefits, they achieved a 75 percent improvement in the speed of completing account recons and an annual savings of roughly $100K per year.

Tax Provision: Victaulic adopted OneStream initially to address their financial consolidation and reporting, as well as planning and budgeting requirements.  Then they extended their use of OneStream for the Tax Provision and were able to automate 86% of the process and streamline the preparation of financial statements and footnotes.

Learn More 

If your finance organization is being hindered from unleashing its true value to the organization, maybe it’s time to evaluate your internal systems and processes and start identifying areas for improvement.  To learn more, download our free white paper titled “Finance Unleashed:  Enabling Modern Finance with CPM 2.0 Platforms.”