4 minute read 11 Dec 2020
How to make the financial close more efficient and rewarding?

How to make the financial close more efficient and rewarding?

By Ludovic Deprez

EY Belgium Financial Accounting Advisory Services Director

Someone who enjoys/lives 8 days in a week in order to get a perfect balance between work, family, sport & party.

4 minute read 11 Dec 2020

A good close on regular basis is important to avoid surprises and to timely adjust the course. The question is: how far do you have to go? And is the time and energy that goes into it worth the output?

Financial departments take much time and effort to finish a financial close. The recent CFO Barometer shows that the output hardly compensates for all that blood, sweat and tears. And COVID has made that more apparent.

  • CFO Barometer

    The CFO Barometer is an independent research initiative of the editors of CFO Magazine in cooperation with EY Belgium. A questionnaire concerning an actual CFO topic was answered by a representative sample of around two hundred Belgian CFOs from medium-sized to large multinational companies.

    The focus of the CFO Barometer is local, so the results are very representative of the Belgian market and as such the CFO Barometer becomes a benchmark tool for the CFO active in Belgium. The results are shown here and commented on by specialists and illustrated with practical experiences.

Blood, sweat and tears

Less than 7 percent of participants is of the opinion that the close process does not give time pressure. 28 percent states to need little to no last-minute changes. If we look at these figures the other way around, it becomes apparent that the great majority of finance departments are under a lot of stress to try and finish everything in time and to undertake the necessary adjustments. What is more, despite all the time and effort, 40 percent of respondents still face many surprises. What do companies need to do to make the close process more efficient?

Make it an instrument for business operations

When you close every month and you still face surprises, then it is likely that the close did not unearth everything that could have been discovered. Another possibility is that the close took so much time that risks were discovered when it was already too late. 70 percent of the participants state that there is simply no time for analysis. That shows that finance departments spend the majority of their time on the financial close itself. In this case, the close does not have much use, because it lags behind on current affairs and loses momentum to be used as an instrument for business operations. Companies need to scrutinize their own close process and stop treating it as part of compliance.

Graph: To what extend is the following true before COVID? "There is no time for analysis"

Close fast and smart

The necessary time needed to finish the financial close should not exceed 8 consecutive days. That saves a few days for analysis and adjustments prior to the close process of the following month. Yet, the survey shows that over 40 percent take more time to finish. What is more, the results of the CFO Barometer also show that a quarter of all employees with over 60 percent of the respondents is working full-time on the close process. An expensive measure, certainly when that process takes too long and adjustments come too late. Fast closing should therefore be a primary goal.

Graph: How long do you take to finish the financial close?

Guide information streams proactively

During the financial close, it is crucial to guide the information streams in the right direction. Finance needs a lot of information about the business. Almost 50 percent say other departments are involved in the close. That exchange of data and information often does not run smoothly or takes more time than it should, which causes mistakes and delays. It is therefore essential that the business is finance-minded, meaning it is proactively and timely sending in certain data. The close should be a road map. If it is only based on financial data, a lot is overlooked.

Use technology to your advantage

To close faster and smarter, you need technology. RPA is faster, not limited by working hours and decreases the margin of error. A golden opportunity for employees to focus more on analyses and action planning. And there are more tools that can support companies in closing fast and smart. Blackline, for example, is used to structure and automate the close process. Or Anaplan, which can be used to translate the insights from the close for business operations. The survey notes that 77 percent of participants are already working with specific software to simplify the process. And over 70 percent say that the close process is already automated to a large extent. These numbers are surprising. Because if so much has already been automated, then why does it still take so much time? And why do finance departments still face so many surprises in the end?

Graph: To what extent is the close process automated on a scale from 1 to 5?

Learn from COVID

20 percent of participants signal an increased time pressure during COVID and more last-minute adjustments. This means that there is even less time for analysis. But 34 percent of respondents do feel the need to automate more because of COVID. This comes to show that there is still more room for automation, despite what the majority of the respondents seem to suggest. On another note, half of the participants state that there are more tasks in the close process than before the pandemic. But that also means that 50 percent does not share that observation and is convinced that their pre-COVID financial close is sufficient.

Graph: Has the number of tasks in the close process increaded during COVID?

Balance the scale

The scale between the time and effort spent on the close process and the time necessary to use the output to enhance business processes is out of balance. A shift is needed to make the close process more efficient and automated. Then - and only then - the finance function can make time for analysis and use real figures to guide the company forward.

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Summary

The recent CFO Barometer surveyed financial departments on the financial close during COVID. The scale between the time and effort spent on the close process and the time necessary to use the output to enhance business processes has been out of balance for a while now. COVID has only increased that gap. A shift is needed to make the close process more efficient and automated. Then - and only then - the finance function can make time for analysis and guide the company using real figures.

About this article

By Ludovic Deprez

EY Belgium Financial Accounting Advisory Services Director

Someone who enjoys/lives 8 days in a week in order to get a perfect balance between work, family, sport & party.