The buzzword on everyone’s lips these days is “digital transformation.” It all sounds very fancy and abstract. In reality, the digitalization of financial data, routines and systems is a highly practical way for finance departments to shift their focus from being producers of financial data to taking on more strategic roles. It means freeing up more time and resources to add value and better contribute to corporate goals.
The need to go digital and adopt modern best practices is especially acute when it comes to the month-end close process. Like a giant road intersection, this is often a bottleneck of ad-hoc manual or semi-manual processes involving cumbersome Excel spreadsheets. These include the recording of financial transactions, reconciling of balance sheet accounts, review of income and expense accounts and preparation of financial statements followed by final sign-off by the CFO or Director of Finance. So much to do in so little time!
Saving €5.8 million a year
Despite these challenges, successful companies are finding ways to automate key routines and boost efficiencies in their financial close process. In fact, a recent EY survey of large and medium-sized companies showed an average savings of €5.8 million a year by doing so*.
According to Per-Øyvind Borge-Hansen, Partner, EY Norway, there are three main reasons for setting a higher standard in this area:
1. To close faster and more cost-efficiently
2. To ensure high-quality financial reporting free from financial errors
3. To free up time for more value-adding activities.
As a board advisor to many successful companies, he is often amazed to see financial controllers still deeply involved in the production of financial data. “In the scramble to finalize the management reports on time, the value-adding business controlling that provides strategic insights into what the numbers say about the development of the business is often sacrificed,” he says.
“Reporting teams are not set up to meet shareholders’
needs for real-time, error -free information.”
Per-Øyvind Borge-Hansen, Partner, EY Norway
The high-performer advantage
“High performers not only produce higher quality reporting faster, they achieve this while spending less money on the finance function than the average finance department,” he says. The message is clear – by striving to be a high performer, the reward is a financial closing process that is faster, of higher quality and more cost-efficient. This results in an output that is more value-adding and better aligned with the company’s strategy.
Generally speaking there are three areas in which companies need to focus to boost the productivity of their financial close:
- Get a unified status overview
- Create standardized approval workflows
- Secure safe, retrievable documentation
According to EY, high performers achieve a higher level of excellence in these areas and spend, on average, five days or less on their monthly financial close. One addition key challenge is the need to meet new regulatory and audit-control requirements, such as SOX, as well as internal controls (such as segregation of duties) that are compliant with GAAP.
Put yourself back in control
Clearly, cloud-based software is ushering in a new era of best practices that put financial managers back in control. The finance department of the future will have complete control over documentation and approvals, a real-time overview of the status of every task, and far more time for ongoing analysis that leads to continuous improvements.
Are you ready to join this revolution and boost the productivity of your finance team? Download our new ebook: THE ULTIMATE GUIDE TO FINANCIAL CLOSE MANAGEMENT
*Sources: Closer to Excellence – EY Nordic Closing Excellence Survey, March 15, 2016, Survey of 146 Nordic companies, by Finn Espen Sellæg, Partner EY, Thomas Embretson, Partner EY, Eva Merete Ødegaard, Senior Manager EY