Why Finance Transformation Should Start With a Fast and Efficient Financial Close

The COVID-19 pandemic drove the need for many finance functions to transform. CFOs pivoted to deal with the crisis, finding new tools and ways of working to facilitate their finance transformation. However, the results have not always equaled the desired outcome. Turning finance transformation objectives into reality is a hard, thoughtful work.

Starting the finance transformation journey

The idea of finance transformation can be overwhelming for many, generally because of the way it is discussed. It can seem extremely complicated. In our experience, the trick is to ‘start small, think big’ and tackle transformation pragmatically.

There is an infinite number of places where you could start. Some of these are forced upon the organisation, others a matter of choice. If you take the initiative, you can dictate the transformation journey and ensure you meet your objectives and goals. It means elevating the finance team from beancounters to strategists, reducing stress levels and producing highly valued output.

The transformation journey starts with a firm foundation. Without a solid governance, internal control and recording platform your transformation journey is bound to end poorly. Once the foundational is strong the finance team can deliver more guidance i.e. concentrate on higher-value activities. To achieve this, you need to create time for the finance team. Automate those low level, repetitive tasks that consume too much of the day. We cannot weaken the governance role, however. It’s fundamental to our roles as accountants.

The core financial disciplines that are so key to the finance team should be high on your agenda as places to start your transformation journey. These include consolidation, reporting and budgeting, and planning – the core activities of any finance team. If you can improve the performance of these core activities, it will provide the foundations for further, more complex, transformation. This article, A Guide to Financial Process Redesign and the tool that goes with it have been effectively used by many finance teams to improve these critical activities.

Why you should start with financial close

When looking at starting a finance transformation journey, put ‘financial close’ high on the agenda. There are several reasons for doing this:

Efficiency gains

Financial close is a process that is repeated several times during the year. Consequently, any efficiency gains are likely to have a significant impact on time savings and reduced stress levels.

Control over the process

Financial close is predominantly controlled and administered within the finance team, whereas a full planning or budgeting cycle often extends outside the finance team into operational areas. Change is difficult in these circumstances, as everyone has a view. Any changes to financial close can be kept within the finance team and will be easier to implement.

Visible benefits

There can be significant benefits derived from an improved financial close. Many of these will be visible to the organisation as a whole, giving a positive exposure to the transformation project. It is so important to get off on the right foot to provide confidence and momentum to the project, not just within the finance team but also throughout the organisation.

There can be significant benefits derived from an improved financial close. Many of these will be visible to the organisation as a whole, giving a positive exposure to the transformation project. It is so important to get off on the right foot to provide confidence and momentum to the project, not just within the finance team but also throughout the organisation.

For more tips on improving your financial close see Happily Ever After - Achieving a Fairy Tale Month-End Close and other content by Nancy Wu.

What can you achieve with a fast and efficient close?

A faster and more efficient close enables the organisation to see earlier where actions are required and implement them more quickly. In theory, this should lead to financial benefits, such as increased revenues or reduced costs.

Improving the speed of close should not be the primary driver for transforming the process, however. While there are benefits to this, the time created is better used to perform better analysis and add value. However, post-COVID, every organisation is looking for efficiency gains and improvements to reduce costs. The finance team will not be exempt from this efficiency drive. We like to think we can show a better return by re-assigning staff to higher value add tasks and not merely to reduce headcount.

Another often overlooked benefit is the fact that a well-defined and highly automated process (that limits human intervention) is likely to yield fewer errors and more accurate results. It will also be transparent, with a complete audit trail from the accounting system through to final reported numbers. In respect of the governance role that we still need to perform, we must maintain this high level of quality, especially for regulatory reporting, where errors can result in financial fines and penalties.

To identify how well your close is delivering value to your business and receive a roadmap to improving your close take the Financial Close Assessment

How do you go about it?

This is the million-dollar question. The answer is that there is no ‘one size fits all’ solution; it will differ depending upon specific needs.

Technology provider LucaNet highlights three fundamentals issues that must be addressed in the closing process and preparation of the financial statements:
They also highlight the role that a technology platform can play in addressing these issues, automating consolidation and reporting and the creation of an end-end platform that also minimises risk. Finding the right platform for your organisation is vital.
It is time to act

• Spending too much time on the collection and validation of financial data
• High-level staff performing low level and time-consuming tasks
• Lack of ‘auditability’ from accounting records to final reported numbers

The current crisis has shown that the finance team are critical to the organisation. Yet again, finance professionals are under pressure to deliver even more with even less. To meet these expectations, we must be more efficient and effective. We need to transform.

The decision-makers need quality information they can trust to make fast decisions in this uncertain world. The finance team needs to deliver more value while retaining a sensible work-life balance. Therefore, when planning your finance transformation, make efficient financial close a top priority.

Chris Argent is the founder of Generation CFO, a boutique consultancy helping CFOs, accounting and finance teams discover and benefit from digital transformation.