4 minute read 19 Mar 2020
How to turn fast closing challenges into opportunities for your business?

How to turn fast closing challenges into opportunities for your business?

Authors

Johan Jacques

EY Belgium Advisory Executive Director

Finance transformation.

Nicolas Valette

EY Belgium Financial Accounting Advisory Services Partner

Financial Accounting & Advisory Services.

4 minute read 19 Mar 2020

Show resources

The close and period-end reporting processes are still very complex. How do companies currently optimize fast closing? What are the expectations for CFOs and finance teams?

As a result of market and regulatory obligations, companies are confronted with increasingly strict (group) guidelines for the delivery of periodic reports. Enormous amounts of information on transactions must be processed in a limited timeframe. This requires a great deal of effort on the part of a company’s accounting and reporting teams. Why is this process so complex? How will the tasks of CFOs and finance teams evolve as a result? Johan Jacques, Finance Transformation Lead at EY Consulting and Nicolas Valette, Head of Financial Accounting Services at EY, explain.

What is fast closing?

Fast closing entails the periodic and structured closing and reporting process of a company, in which all knowledge about the financial facts is collected and disseminated to the main stakeholders within a short period of time.

There is an emerging trend for this collection and dissemination of information to become more frequent, especially when preceded by an acute crisis situation (such as the current corona crisis and its economic impact). The aim of fast closing is to keep the time span between business results and collection/dissemination as short as possible.

To make this process efficient, companies wish to make full use of new technologies that can replace manual routine tasks.

This process involves various teams in a company, from accounting through consolidation to reporting. They must join forces to successfully collect and interpret all the desired information.

Why is this process so complex and significant for a company?

The closing and reporting process is a complex process that involves many different data suppliers and dependencies. Sharp group guidelines can steer this process to some extent, but a thorough project-based approach and user-friendly software is in practice very important to manage the closure and reporting process.

Thanks to increasing automation, finance employees are given extra time and space to put customers back in the center and work on solutions with added value.

EY research shows that closure periods have shortened considerably over the past 20 years. For companies listed on the CAC 40 (the stock index of the 40 most important companies on the French stock exchange), we see an average decrease of no less than 22% over 20 years (-13.6 days). The same trend can be seen for companies listed on the SBF 120, which is the 120 most traded shares in Paris. Here, there is a 21% fall (-14.4 days) over 20 years.

There are several reasons for this drastic fall:

  • Increased automation/standardization of transactional processes impacting closing activities, with a prominent role for Procure-to-Pay (P2P), Order-to-Cash (O2C) and Record-to-Report (R2R) among others.
  • An increase in the number of closing moments.
  • Anticipatory activities, such as preclosing in December and May.
  • Better integration of process support software, such as ERP and EPM systems.
  • A more efficient approach to closing activities, including better planning, coordination with subsidiaries and the application (within a group of corporate entities) of a single set of accounting rules.

The future role of the CFO in closure processes

The process of fast closing creates opportunities to rethink the current role of the CFO and make it future-proof. In the coming years, Chief Financial Officers will increasingly evolve into internal business partners who help define the financial strategy and independently trigger new business ideas and create added value. The CFO becomes the CVO, The Chief Value Officer.

In order to realize this shift in tasks and skills, the job description of a CFO/CVO will have to be thoroughly rewritten. Under the influence of increasing globalization, stricter legislation and regulations and the rapid emergence of new markets, the role of CFO/CVO will gradually evolve from a rather technical and stand-alone accounting function to a professional who facilitates innovative processes, assists the CEO in strategic decisions and detects digital solutions with an open mind.

The process of fast closing creates opportunities to rethink the current role of the CFO and make it future-proof. Chief Financial Officers will increasingly evolve into strategic business partners.

And how will the finance team evolve over the next few years?

The CFO's staff will also feel the impact of digital transformation and increased transparent and rapidly evolving markets. On the one hand, promising technologies – such as machine learning, blockchain, Roboting Process Automation (RPA) and Artificial Intelligence (AI) – will further optimize the closing process and significantly shorten the turnaround time. On the other hand, finance staff must also be prepared to retrain continuously and to embrace automation tools.

EY research shows the following (selection of) important trends in the finance team of the 21st century:

  • The need for new skills and competences: less need for traditional routine tasks (taken over by new technologies) and extra need for analytical and scientific profiles (for the collection and analysis of financial data).
  • An increasing need for agile and creative work: as a result of the previous trend, finance professionals are given extra time and space to process the collected data and to work on financial/fiscal solutions that offer their clients extra added value.
  • Extra focus on customers: personalized customer data (reviewing past performance and looking ahead to possible commercial opportunities) will further optimize customer relationships.
  • An increasing role for a thorough approach to cyber security: not only through information systems, but also through human behavior.

Fast closing must be a non-event

The migration from manual routine tasks in finance, accounting and controlling to more automated finance management is an unstoppable trend. If a company in 2020 needs two months to close a financial year, something is fundamentally wrong with their management processes. Fast closing should be a non-event, where a mix of automation tools and professional guidance can make a streamlined process of financial reporting. But such an evolution is impossible without high-performance change management within the company. This is the only way to make fast closing future-proof.

EY Belgium newsletter

Stay up to date with our EY Belgium newsletter. 

Subscribe

Summary

Under pressure from internal and external factors (from impatient CEOs over globalizing economies to increasing political regulation), companies are confronted with increasingly strict (group) guidelines for the delivery of periodic reports. With fast closing, enormous amounts of financial data have to be processed in a limited timeframe, which requires the accounting team in a company to work even harder. How can new technologies and automated management processes contribute to shorter turnaround times and satisfied stakeholders? What skills and competencies do the CFO and their staff need to develop?

About this article

Authors

Johan Jacques

EY Belgium Advisory Executive Director

Finance transformation.

Nicolas Valette

EY Belgium Financial Accounting Advisory Services Partner

Financial Accounting & Advisory Services.