Amid a series of disruptions triggered by the COVID-19 pandemic, finance leaders must tackle converging and complex challenges. Here’s how.
Many private companies across the world are finding themselves on uncertain footing, with remote working and employee absences causing disruption as a result of the COVID-19 pandemic. Faced with these unprecedented pressures, finance leaders need to explore new ways to approach the financial close process.
For instance, close activities are likely to face delays due to an all-remote workforce, with possible capacity constraints and knowledge gaps. Third-party data, and critical financial systems and information, may be harder to access and timelines for reviews may be condensed.
Meanwhile, abrupt changes in the economy will likely drive different requirements and additional analysis for the financial close. Declines in revenue, cash positions and business closures can trigger asset impairment and evaluation of going concern.
And these problems can trigger a domino effect. Business interruptions may result in incomplete information from upstream operational activities and external providers. Non-electronic data or paper records that are critical to the month-end close process may not be accessible. Transmission of sensitive data for remote close and external audit will require increased cybersecurity, and interim process changes may require new or different internal controls to mitigate risk.
At a high level, private company leaders should ask themselves questions such as:
- How is the crisis expected to impact my business forecasts in the remainder of the fiscal year?
- What level of people or process redundancy does my finance function have?
- How and how quickly should financial models be updated or rebuilt to be used in the current environment?
- How will changes in processes be communicated to update control documentation and testing?
- How do you organize your review and audit committee meetings to work remotely?
How to handle a private company financial close remotely (pdf) is a guideline for understanding the impact on the close process and forming a plan to move forward. It is designed to help finance function leaders tackle broad challenges as they prepare for a month- or quarter-end close.