The financial close, consolidate and report process is one that most organizations struggle with. It's not because it's exceptionally complex - though many aspects can be. It's because the demands put on finance teams are so large that this process gets neglected in the name of getting everything else done which seems to be as much, if not more, of a priority. But that's where the thinking needs to change. IBM Product Marketing Manager - Performance Management, Lindsay Hampson discusses her client experiences related to this process and provides input as to why and how this process should be considered for an upgrade.
Here's Lindsay's post:
I've worked with a lot of clients to understand their close, consolidate and report process, or CCR. Through this experience, mostly with medium to large clients worldwide, it's very safe to say that every organization’s CCR process looks a bit different.
Typically though the building blocks are the same. That is, the CCR process involves closing a local ledger and sub-ledger, submitting results and validating data submissions. Plus, most involve data assurance, such as collecting and reconciling data submissions, and consolidations, including creating single currencies, minority interest holdings and intercompany eliminations. And that's not all! Then comes the lengthy process of reporting internally and externally. Yes, there's a great deal of moving parts in this. Still, no matter the structure many organizations have in place, most still depend on primitive tools and practices to manage all of this.
More on the close process.
The close process does not happen overnight. Rather it creates consecutive overnight terrors for process managers.
Timelines for completion depend on an organization’s individual financial close management requirements. However, if you ask what the average close cycle is those involved in the process will invariably frown, reluctantly say a number of weeks, and soon complain that it takes far too long. This happens because there's a constant struggle with lack of time, limited control and low confidence in this recurring and very manual process.
Risks and missed opportunities
The consequence of getting the CCR process ‘wrong’ is large. Incorrect or late close reporting often results in fines, diminished market reputation, and lowered investor confidence. In addition, too much time and effort is spent managing the process leaving little or no time to perform analysis of the results in the name of improving business performance. Most finance department leaders are unable to spend enough time on high value activities including supporting business strategy, growing enterprise performance, and aiding in the area of risk management. The basic blocking and tackling required to complete the close process is getting in the way.
Systems are part of the problem
The reason this happens is that the systems these businesses rely on, ranging from standalone spreadsheets to those from ERP vendors, are the following:
Entirely managed by IT;
Function at glacial speeds; and,
Lack a single version of the truth to provide real time analytics.
Process is another part of the problem
Consumed with tedious, time-consuming tasks;
Inefficient and costly close activities when handled manually;
Little or no visibility into the ongoing status of different steps in the closing process; and,
No mechanism to track tasks, identify bottlenecks, and manage all areas of the close process.
The challenges associated with a close, consolidate and report process are enormous. And they creep up over and over again.
A Solution is the solution
Alright, you can put down your ‘monster spray. Fundamental to addressing these realities is smarter software. More and more organizations are opting for a complete financial close (record to report) solution which supports detailed account and ERP data analysis, complex consolidation accounting processes, financial controls, financial and management reporting, and regulatory filing. It really is a difference maker.
On that note, we have an exciting announcement coming very soon so stay tuned for more on this! In fact, one way to really connect with IBM and other finance practitioners is to attend our premier conference IBM Vision for finance executives happening May 18-21st in Orlando, Florida.
Thanks and happy closing - Lindsay