Can the CFOs key accounting process challenges be overcome?
The simple yet stubborn accounting process challenge for most CFOs isn’t bound by land or sea: 90% of both European and American finance staff in Adra Match’s recent financial close benchmark survey reported, they are under pressure for a faster monthly close.
On the other hand, only 28% said they actually trusted the balances carried down which were a result of their financial close process. Furthermore, 39% reported that they were not satisfied with the financial close process, and nearly a fifth of European finance departments are without a second approver!
– All of these statistics serve as a rather bad omen for the dream of both a fast as an accurate close process, since speed and quality appear mutually exclusive qualities of a financial close.
>>> For more shocking stats from our financial close benchmark survey download the free infographic <<<
So let’s have a closer look at these all too common financial close challenges faced by CFOs…
Challenge 1: Speed
The pressure on closing faster is tougher, since around three-quarters of the 90% in the financial close benchmark survey were not able to file their monthly report within the first three days passed the due date.
– This demonstrates that the monthly close process is taking longer than required even without the pressure of closing quicker.
So what is holding up the process?
In many cases, it will simply be the reconciliation process. Reconciling account balance sheets can take days, especially if using a spreadsheet approach. As well as taking a long time, manual balance sheet reconciliations pose a risk to the reliability of your reported numbers. Typically, spreadsheets come with an error rate of between 0.8-1.8% – partially due to human mistakes, partially due to errors in formulae.
Often the account close process is also held up by the lack of overview of the process and its approval. When you are extremely busy it can be tough to follow-up on approvals requested by the financial accounting team, slowing the whole process down and resulting in the monthly close. It was described quite appropriately by one respondent as ‘a mad dash’. Excel isn’t much help on aspects like these.
So an ideal account close process should include a speedy and accurate account reconciliation as well as streamline the approval process for a timely monthly close.
Challenge 2: Reliability
All financial accounting professionals want a reliable monthly close, otherwise what’s the point? If you can’t depend on the reported balances carried across being right, then they’re just make-believe.
But shockingly, 72% of finance staff surveyed don’t trust the reported numbers…and it gets worse: When Adra Match compared the opinion of CFOs and front-line financial accounting staff doing the actual reconciliations, it was revealed that only 16% of front-line staff trusted the reported numbers compared to 30% of CFOs and FDs.
But ‘reliability’ doesn’t just mean trusting that the numbers are correct, it also applies to the whole monthly process.
Adra Match’s survey also found that 19% of European financial departments didn’t have a second approver – meaning almost a fifth of European businesses are leaving the door open for regulatory criticism.
An ideal account close process needs to provide accurate numbers with clearly segregated duties in order to really meet the challenge of reliability.
If you can’t rely on good steps and procedures being in place then you may also end up in trouble with your financial regulator. Read our previous blog: Relying on your financial auditor – oops it’s illegal.
>>> Download the full financial benchmark survey results <<<
Tipping the balance
Adra Match has listened to this feedback and developed a new Cloud-based financial close software called BALANCER. With this software, financial departments can automate their accounts reconciliation within minutes, progress the approval workflows with automated email reminders and streamline the whole process for a faster and more reliable monthly close process. The added value for CFOs is that the software includes an oversight dashboard where you can gain clear visibility over the whole process with ease – meaning less stress and greater efficiency.
What are your key concerns and challenges when it comes to the monthly financial close process? Can you sum them up in just one sentence in the comments section below?