It can be challenging to continually report on all open items during your financial monthly close process – time and resources are quickly eaten-up. Yet complete reporting comes with its own rewards…and punishments.
When Adra Match surveyed European and US finance professionals we were surprised to find only 8% were satisfied with the visibility of their month-end close and only 19% said that they can fully rely on their reported numbers.
The problem with not accurately reporting is twofold: one, a lost carrot (reward) and two, a raised stick (punishment). If a company fully reports all its account details at the month-end close then investors will be far more confident putting their money into the business – your reward for all that gruelling work. If, however, a company provides misleading financial information which is then used for a business decision such as a merger, for example, then the individual officer could be held responsible and fined. Therefore, it is essential that CFOs, Financial Directors and senior finance staff are reporting accurately.
Why don’t finance staff trust the reported figures?
In order to improve visibility and accuracy of the reported numbers it is important that we first understand why the numbers instil so little trust. It is interesting to note that while only 19% said they could fully rely on the reported numbers, this figure was much lower for front-line staff than senior staff, indicating that CFOs have misplaced trust in their reports. Let’s look at some of the key reasons why:
- Reliance on manual processes – One of the biggest reasons finance staff do not trust the reported numbers is that much of the month-end close process relies on error-prone manual tasks, such as spreadsheet reconciliation. Spreadsheets have an error rate of between 0.8-1.8% naturally anyway, but the lack of change tracking, reliance on formula and ability to manipulate results dramatically reduces their reliability.
- Lack of time – The widespread use of manual processes also contributes to the next problem faced by finance departments: a lack of time. Manual processing tasks like account reconciliation are very time-consuming, meaning only 35% of finance departments are able to report on the close date. Without more time it is difficult to ensure an accurate and timely report, and near-on impossible to conduct a deeper analysis on the reported figures.
- Lack of second approver – Exactly a quarter of surveyed finance professionals admitted that they do not have a second approver for their month-end close figures. The lack of a second approver may be due to the lack of time but as a result errors inevitably creep in, and will go uncaught.
How to improve the reliability and visibility of your month-end close
In order to avoid the stick (personal fine) and enjoy the carrot (increase investor interest), business must move toward a smarter month-end close process. A smarter process would ensure:
- Automation wherever possible – automated reconciliation software can ensure a more accurate financial close process while drastically reducing the time required
- Changes and calculations are tracked – the easiest way to maintain a strong audit trail is to provide unique software logins to all staff, tracking individual changes as they go
- The CFO always has a clear overview – with BALANCER the CFO can log in at any point and instantly see the current monthly close status and next action requirements
- Easy and detailed reporting to investors – you need to be able to generate detailed reports and send them through to investors, auditors and regulatory bodies at the drop of a hat
BALANCER provides all of this functionality and more, ensuring you deliver the best, most accurate and timely service to potential and current investors. This in turn will help reduce their perceived risk, attracting more investors on more generous terms, and making the cost of the software wholly worthwhile.
To discover more about balance sheet reconciliation software BALANCER watch this short introduction video, the clip takes you through the back-end of the software functionality.
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