CFOs and company controllers are virtually all the time seeking to shut their firm’s books (in accordance with all laws) sooner and extra effectively.
In as we speak’s fast-paced enterprise atmosphere a sooner shut means having the ability to spot and act on issues or alternatives sooner; it additionally means extra time out there for accounting workers to carry out value-add evaluation that may enhance enterprise choices, and that in flip that elevate the finance perform right into a extra strategic companion to the broader enterprise.
Suffice to say there are important tangible advantages to a sooner shut. But there may be additionally a excessive price of the know-how wanted to maneuver from 5 to 4 days, for instance. Many firms might want to determine if 5 days is a “quick sufficient” shut for them to know if the know-how is value it. Trying past that, nonetheless, the belief of this text is that some are merely doing it higher than others.
To place this concept into numbers: the median finance group closes the books in seven days. The quickest 25% of firms shut the books in 5 days, and the quickest 10% of firms shut the books in 4 days or fewer. Or checked out one other approach, the distinction between being a median firm or a tenth percentile one is no less than three complete days of additional time for the accounting staff every month.
This information comes from a complete Gartner examine of accounting shut practices from 2020-2022. Maybe extra attention-grabbing than simply figuring out some firms handle to shut sooner than others is that the examine revealed some frequent themes amongst firms with related shut instances, in impact providing a roadmap to enhance the time to shut the books, summarized in Determine 1.
Determine 1: Typical actions taken to shut the books, by variety of days to shut
The traits of organizations detailed in Determine 1 all align with 4 broad classes: course of enhancements; expertise and organizational design; insurance policies and procedures; and know-how utility. Under we’ll develop on these traits as they map to the time to shut.
Seven-day shut
Firms that sit between the fiftieth and twenty fifth percentile have a time to shut of 5 to seven days. So, whereas these aren’t the quickest firms to shut, they’re sooner than the bulk.
By way of course of enhancements, two issues stand out. Firstly, these firms are sometimes holding post-close conferences that permit for steady enchancment by figuring out obstacles in the course of the shut and enhancements that may be made. Secondly, they map the important path of the shut. This could take the type of a listing or a course of map however what actually issues is that duties wanted to finish the shut are listed in chronological order so here’s a collective understanding of what must be accomplished when.
After we take into account expertise and organizational design, offering larger authority for the controller to make choices is a typical trait. A controller with authority can standardize geographic or enterprise unit practices and allow simpler streamlining of data within the shut. One other frequent attribute right here is the appointment of a world course of proprietor: a full-time, devoted individual (or staff) accountable for end-to-end course of enchancment and standardization.
Taking a look at insurance policies and procedures, firms that shut sooner than seven days are utilizing danger and/or materiality assessments to determine work that may be moved away from the quarterly shut interval, and in addition are finishing a “gentle” shut on non-quarter months: a technique the place finance leaders use estimates, instead of a full reconciliation of accounts, to cut back effort and save time in getting ready a set of inner monetary statements.
Lastly, know-how use is a giant differentiator in shut instances. To cut back shut time under seven days, firms are consolidating enterprise useful resource planning software program into one fashionable system or making certain that a number of ERPs are built-in seamlessly. One other key know-how differentiator is automating no less than 50% of journal entries. Handbook journal entries are a considerable time sink for shut groups, so decreasing this quantity considerably via materiality thresholds or automation has a big effect on shut instances.
5-day shut
Holding a pre-close assembly is a typical further course of enchancment present in firms closing sooner than 5 days. With the shut being downstream of a number of processes, comparable to accounts payable and receivable, preclose conferences present a chance to determine and handle any doable course of disruptions.
Having a workers member reporting via the finance perform whose function is completely dedicated to the upkeep, analysis, configuration and improvement of finance-specific applied sciences, techniques and instruments (AKA a finance IT lead) is the primary further expertise and organizational design issue noticed in firms that shut this rapidly.
As with firms that shut beneath seven days, utilizing danger and materiality assessments to determine and shift workloads that needn’t occur within the shut interval is vital. The primary distinction right here is the method is extra developed with full elimination of extra duties within the shut interval.
The important thing know-how marker right here was that firms have eradicated ERP customizations. Controllers must be able to shift their enterprise processes to suit the ERP relatively than customizing the ERP to suit the enterprise, as a result of as a rule the processes within the ERP symbolize greatest observe throughout a number of organizations.
4-day shut
The issues that finance organizations within the elite tenth percentile of time to shut do this others do not are predominantly associated to expertise, organizational design and know-how and there are additionally clear hyperlinks between the 2 areas within the following traits.
With regard to expertise there are two predominant points. First, accounting workers have a really excessive diploma of digital literacy that allows full use of obtainable applied sciences: possessing digital competencies of technological literacy, digital translation, digital studying and improvement, digital bias administration and digital ambition. Second, the perform has the potential to create and preserve an information governance construction that’s key to unlocking essentially the most worth from enterprise information.
There are additionally three predominant parts to know-how utility on this group of firms. First, ERP techniques are used to their full potential and, in most firms, this isn’t the case usually merely due to a lack of knowledge about what the total set of capabilities is. Second, the usage of an utility programming interface, robotic course of automation or related know-how to combine accounting shut inputs on to the ERP system to drastically scale back handbook work. Third and ultimate know-how utility is to make sure dependable inputs from upstream processes comparable to accounts payable and accounts receivable as a result of finance processes could be disrupted by digitization adjustments in different capabilities as finance transformation leaders have restricted visibility into particular person enterprise groups’ methods.
