3 ways the financial close process can get a boost from analytics
Anybody who has ever been near an accounting department knows closing the books is a high-stakes time. Financial teams face pressure to execute in less time and with 100 percent accuracy, but the financial close process is often plagued by bottlenecks and a reliance on outdated analytical methods. These issues slow down the process and make the results vulnerable to errors.
One way many companies are escaping what sometimes seems like a perpetual state of close is through the use of analytics platforms. These solutions improve efficiency and reduce mistakes, leaving more time for strategic planning. Here are a few examples of how analytics can help finance and accounting teams power their financial close processes.
Analytics platforms typically provide dashboards that let users see the status of the close process, detailing incomplete tasks, unfinalized accounts and open reconciliations. Being able to see where bottlenecks are occurring in the process, which is especially crucial when finance and accounting teams are geographically dispersed, can lop entire days off the close process.
That may not sound like a big step until you consider that it takes companies a median of 15 days to complete a close cycle, according to nonprofit benchmarking firm APQC, and that the worst of the 520 companies with more than $1 billion in revenue it surveyed needed up to 25 days to get the job done. The top quarter, however, completes the process in 12 days or less and at one fourth of the cost compared to the bottom quarter, APQC said.
Analytics platforms can streamline and foolproof many financial close processes that typically live in Excel. Half of all organizations use spreadsheets regularly for business intelligence and analytics, and another 38 percent use them universally for those purposes, according to data from Ventana Research. "We have found repeatedly that spreadsheets are not well suited for complex analytics and recurring analytical and reporting tasks. We often find excessive spreadsheet use associated with negative impacts on accuracy and timeliness, which this research confirmed," the report noted.
Reveal problems before close
A fast close requires being able to collect and combine a massive amount of financial information quickly. By collating data earlier in the accounting period, analytics platforms can uncover problems such as mismatched invoices, off-track balances or missing approvals. That lets managers tackle problems before they derail the close process.
Help find the "why" faster
Once the books are closed, the finance team's next job is often to explain those numbers to managers, directors and shareholders. Testing is part of the financial close process; during that time, analysts look for missing or incomplete data and look at the correlations between different parts of the business. It can be grueling work if done manually or with spreadsheets. In fact, companies that use spreadsheets regularly or universally for analytics and reporting take two days longer to deliver metrics and key performance indicators, Ventana Research found. And it only gets worse as the amount of data increases.
Though many people associate closing the books with looking back on performance, using analytics to streamline the financial close process can turn it into a time for focusing on strategic planning and execution, rather than data management.
Learn how IBM Financial Performance Management solutions can help you achieve a faster close by automating your financial consolidation process, streamlining report production and reducing overall risk of non-compliance.