Streamlining the Financial Close, Consolidation and Reporting Process
Updated: Apr 11, 2022
In today’s volatile and sometimes disruptive economic environment, CFOs and finance organizations must lead organizational decision-making processes with insight, speed and confidence. Yet many finance organizations are still bogged down by inefficiencies in routine processes such as the period-end financial close and reporting cycle, making it difficult to shift time to value-added analysis and decision support.
Many organizations struggle in managing this complex process with spreadsheets and manual work, or legacy financial applications that are inflexible and no longer meet current business requirements. Read on to learn about the challenges of the financial close, consolidation and reporting process, the software tools that are available and the results organizations are gaining by using modern, cloud-based financial close and consolidation software applications that are purpose-built to conquer the complexity of the financial close.
Navigating the Complexity of the Financial Close
The financial close, consolidation and reporting process can be relatively easy in a small enterprise using a single, centralized GL/ERP system, a single currency and a simple legal entity structure. As organizations grow and evolve in sophistication, however, the process can become quite complex. In a mid-sized to large enterprise, the financial close, consolidation and reporting process spans the following activities (figure 1):
Navigating through these steps becomes more challenging based on the size and complexity of the enterprise. Factors that increase the complexity of the process include the following:
Number of GL/ERP data sources that must be integrated
Number of currencies that must be translated
Level of intercompany activity and transactions that must be eliminated
Complexity of ownership structure (i.e., joint ventures and partial ownerships)
Number of journal adjustments required
Number of accounts that must be reconciled
Complexity of the tax provision across geographies and countries
Number of reporting standards that must be supported (e.g., US GAAP, IFRS, GASB etc.)
Types of reporting and number of stakeholders (e.g., management, financial, statutory)
How long does it take organizations to execute the financial close and reporting process? Well, according to the Ventana Research 2019 Office of Finance Benchmark, roughly half (52%) of the companies surveyed close their books within six business days. This figure represented a slight improvement over the 2014 benchmark survey, in which 43% were completing the financial close process in six days or less.
While this is good news, the bad news is that 25% of organizations surveyed take 11 business days or more to close the books. Worse yet, 24% take seven to 10 business days. In other words, there’s plenty of room for improvement.
Software Options and Trade-Offs
There are several types of software tools available to support the financial close, consolidation and reporting process. Below (figure 2) is a brief summary of three primary options – spreadsheets, GL/ERP systems and purpose-built applications.