With the end of 2017 fast approaching, many finance professionals might be counting down the days with some degree of dread. Year End is just around the corner – whether you report on the December 31 or later – and with it comes the many long hours accountants will spend going over balance sheets and profit and loss accounts, investigating account irregularities and chasing sign offs. In recent years many financial institutions and corporations have sought to embark on vast Finance Transformation programmes to streamline their financial control process and to reduce the time and human effort taken to achieve period end. This has come with varying degrees of success.
How do you achieve Fast Close?
The race to collapse the days it takes to achieve month end has taken many different turns for those who have attempted it. Some companies have sought to outsource finance operations, others have tried to harmonise processes, and many have looked to legacy systems for answers.
There are inherent risks with each of these approaches – outsourcing can lead to the loss of managerial control, as well as a decrease in operational knowledge over time; harmonisation is difficult in a cross-geographic organisation working with multiple general ledgers; and legacy systems are not always the right fit. The result of which is that many companies are forced to rely too heavily on manual processes. The proliferation of spreadsheets has increased in recent years as firms have been slow to buy new, more specialised software. While the account attestation process might have been automated by some companies, substantiation still sits – for many – on spreadsheets.
The good news is that achieving a fast close does not require a large-scale, expensive Finance Transformation programme of work. A set of key ingredients aimed at the account sign off and attestation process can assist any finance department to reduce the number of days it takes to close period end:
a) Remove last minute general ledger entries by adopting early submission.
b) Start a few days early and resolve issues before month end.
c) Encourage early account sign off through regular touch points.
d) Enhanced operational controls to capture and escalate errors.
e) Create a transparent framework that tracks progress.
Be ahead of the curve
Most account owners adhere to internal processes and will submit their financials in a timely manner. But by bringing the account submission process forward by a few days there will be a significant, positive impact to month end and will inevitably lead to fewer investigations. Undoubtedly there will be initial resistance by account owners, but a well-developed strategy laying out the positives for all involved should ring true as forward planning will make everyone’s life easier at the end of each month.
All too often, obvious problems go unnoticed or unreported until the month end process is well under way. By adopting a pre-period end run, many of the underlying issues are surfaced in advance and can be resolved prior to close. Another trick is to trend recurring problems, which will give financial control the opportunity to plan ahead or put strategies in place to tackle bottlenecks. While this option may seem onerous or overkill, it will reduce the monthly late-night sessions over time.
It is sadly true that most account owners tend to leave account sign off to the last minute and might not always have the time to thoroughly review their accounts. This is especially the case in large organisations which have complex account and sub-account hierarchical ownership matrices across multiple geographies and general ledger systems. For the finance team, keeping track of the sign offs and chasing those that are overdue in such a scenario is almost a job in itself! There is no easy or quick manual solution to this problem. Luckily, some of the newer finance systems that facilitate automated sign offs can repeatedly remind account owners of their obligations. Regular touch points with the account owners will go a long way to encourage them to sign off early.
Controls, controls, controls
While Sarbanes-Oxley was the initiator for the regulatory need for more robust balance sheet reconciliations, having a thorough controls framework in place across the whole of the finance function is key to flushing out issues as soon as they occur and escalating these to their rightful owners for resolution. Reducing operational risk through the removal of so-called end-user computing (EUCs) mechanisms such as spreadsheets goes a long way to gaining efficiencies. By running effective, automated reconciliations daily, compliance and audit risks will be significantly reduced, as well as having a system in place producing necessary evidence for month end accruals.
Transparency is key
Ultimately it is the finance department that brings all the above actions together to consolidate the period end process. Key to a successful fast close is the ability to monitor each of the various components throughout month end as close to real time as possible. Finance managers need to have visibility of the progress made, as well as the outstanding tasks to drive the month end process to a successful conclusion. However, keeping track of account attestation, issue resolution and escalations is not an easy task, especially in an environment that relies on manual processes or where part of finance operations has been outsourced. In these circumstances there is a clear business case for automation.
A new approach for 2018?
However onerous the challenge, creating oversight of the various components in the account attestation process during month end will inevitably lead to a faster close. With Year End almost upon us, there is no better time to use these few quiet days to start thinking about how the process can be changed. There is still time to put some, if not all, of the above advice into place ahead of the 2018 financial year. While automation is undoubtedly key, success depends on the buy in from those involved in period end. Guaranteeing a smoother Year End for 2018 is perhaps the gift all accountants deserve.
The article was first posted on www.bobsguide.com.
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