3 minute read 3 May 2020
Man working from home

How to handle a private company financial close remotely

By

Randall Tavierne

EY Global Assurance Private Client Services Leader

Global leader helping entrepreneurs and private companies realize their ambitions. Frequent speaker on the high-growth market.

3 minute read 3 May 2020

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.

Finance leaders should act now to stress-test their close process and prevent delays or misstatements in financial reporting.

Rapid responses required

Finance leaders should act now to stress-test their close process and prevent delays or misstatements in financial reporting. Consider the following actions:

  • Establish a virtual close command center — prepare to deal with accounting, tax, information technology (IT), the board of directors and other cross-functional issues in real time.
  • Replan your close procedures — adjust calendars and add in a close dry run. Consider estimates and materiality changes to expedite where possible.
  • Anticipate deep-dive requirements — identify where incremental effort is required to validate accounts in the current environment. Be prepared to tell your board what you plan to do about key risk areas. Coordinate with your auditors closely for a remote process.

How to handle a private company financial close remotely (pdf) details further actions you should consider. While this is no doubt a challenging time, when your team resumes its typical in-office approaches, you will be equipped with valuable lessons for operating more effectively and efficiently — in better circumstances.

Summary

Private company finance leaders should consider immediate changes for this period-end close process, with potential gaps in their workforce and available data, all as the economy rapidly shifts under their feet. They should act now to stress test their close process and prevent delays or misstatements in financial reporting.

About this article

By

Randall Tavierne

EY Global Assurance Private Client Services Leader

Global leader helping entrepreneurs and private companies realize their ambitions. Frequent speaker on the high-growth market.