If you work in finance, you’ll probably agree that speeding up the headache that is the month-end close wouldn’t be such a bad thing. Who could argue with fewer days spent in consolidation, forecasting, and reporting? But a speedy month-end close isn’t just good for accounting—it’s also good for the business.
According to Ventana Research, 62% of finance departments that perform their month-end close within six days are able to provide critical, timely information to the business. Of the finance departments that take longer than six days, only 39% are able to provide critical, timely information to the business. These finance teams aren’t just closing faster. They’re adding real, tangible value to the business by getting key knowledge into the hands of decision-makers in time to make a difference.
Closing faster is obviously desirable, but how to do it?
Rather than working harder or faster, there are a few key steps finance organizations can take to speed up the month-end close. These include things like getting off of desktop spreadsheets, aggregating cross-business data into a single cloud-based system, and automating everything that can be automated. Sound like a tall order? It is. But with the right financial planning and analysis (FP&A) platform, it can be easier than you think.
Drop Excel and Head For the Cloud
Desktop spreadsheets in general—and Excel, in particular—have long been staples of finance departments. Overall, they’re great for handling finances when businesses are small. But when businesses grow, spreadsheets create more problems than they solve.
For starters, they rely on manual input, and where there’s manual input, there’s human error. Beyond that, spreadsheets usually get traded back and forth during close-outs via email, a practice that tends to introduce issues of version control.
All this manual labor adds up to the drawn out month-end close process, as CFA Robert Kugel has written: “[Companies] that are substantial users [of spreadsheets] on average take 7.7 days [for month-end close], more than one day longer than those that limit their use (6.5 days) and more than two days longer than those that rarely use them (5.5 days).”
The solution is to make a shift away from spreadsheets to a Cloud Suite that automatically pulls data from cross-business systems, eliminating errors and getting rid of concerns about version control.
That’s what the finance department at LT Apparel Group did. At one point, the organization was struggling to manage between 50 and 60 individual Excel files saved on multiple servers across the organization. By switching from this laborious, manual system to Planful, LT Apparel Group was able to cut down on reporting time by 98%, leading to swifter month-end closes and happier accountants.
You can learn more about their story here.
Consolidate Data in a Single Source of Truth
Another impediment to a fast month-end close is the fact that most organizations don’t have a single source of truth collecting and housing all of their real-time data. Instead, financial data is spread in multiple enterprise resource planning (ERP) systems across various business units. When closing time rolls around at the end of the month, finance has to scramble to collect and consolidate all this data.
This process is time-consuming, tedious, and, as Deloitte points out, leads to an unfortunate situation where finance organizations have access to accurate data only at the end of every month and never in between.
A better way to do consolidation, and thus speed up the month-end close, is to have an FP&A platform that integrates with various ERP systems and can pull data from them on an ongoing basis. This way, the FP&A system functions as a single source of truth housing all of the most up-to-date data, and the finance team doesn’t have to lose time at the end of each month culling and consolidating numbers from across the business.
When Capitol Petroleum Group discovered that their consolidation process was slowing down their whole month-end close, this is exactly what they did. After onboarding Planful as their FP&A platform, the company’s financial organization was able to reduce consolidation from a three-day process down to a three-minute process, effectively eliminating the need for two full-time equivalents (FTE).
For their full story, watch this video.
Automate Your Way to Your Fastest Month-End Close Yet
Manual processes have too long been the norm for managing the month-end close, whether it’s for entering and consolidating data, creating reports, or performing reconciliation. Reducing the length of the month-end close in any meaningful way depends on automation.
In his perspective on Ventana’s 2019 benchmark research on the Office of Finance, Kugel noted that for the first time in 15 years, companies showed significant improvement in month-end close times. The reason for this can be summed up in a single word: automation. Kugel writes that “[88%] of companies that apply a substantial amount of automation to their close are able to close their monthly books within six business days, compared to 50% that apply some and 40% that apply little or none.” If you want a faster month-end close and you aren’t automating your processes, you’re missing out.
Using a robust, cloud-based FP&A platform for automating month-end close operations can complete processes that once took weeks with the click of a button. Business services company CBIZ knows this better than most. Prior to bringing in Planful, it took CBIZ up to four hours to create profit and loss statements (P&Ls) and one to two weeks to put these P&Ls into usable financial models that could be packaged for reports in the month-end close. Now, generating P&Ls and incorporating them into models is just a single keystroke away, effectively saving finance up to two weeks every month.
Explore the CBIZ story in this video.
Make Sure Finance Technology Is Finance-Owned
An often-overlooked element that impedes swift month-end closes is when finance departments are dependent on IT to help manage finance technologies. If administrative or setup changes are required, finance has to call on IT. If errors arise or there are updates that need to be implemented, finance has to call on IT. If there’s a bug that no one on the finance team can figure out, finance has to call on IT.
This is the opposite of agility. It slows everything down. And if it happens at the end of the month, it prolongs the process of closing out the books.
Ideally, finance technology should be easy, intuitive, and straightforward enough that finance departments can self-serve and own all parts of it without having to wait on IT (or expensive outside consultants) to come to the rescue. This kind of independence makes finance faster, nimbler, and more self-reliant.
That’s what happened for the finance team at PS Logistics, who at one point was struggling to smoothly manage their month-end close process. With multiple spreadsheets interlinked, reports would take up to three days to change, and the company’s lean IT department simply didn’t have the resources to help finance manage the technology they were using.
The finance team traded out their old system for Planful. With its user-friendly interface, flexibility, and customizability, Planful helped the team at PS Logistics reduce the need to rely on IT support. Within a short time, they were able to cut down on financial reporting times by 80%.
Find out more about the PS Logistics journey here.
Save Time for Finance, Save Big for the Business
Deploying a cloud-based FP&A platform to help accelerate the month-end close process with fewer spreadsheets, consolidated data, finance-owned technology, and automation is revolutionary for finance departments. And when finance wins, so does the rest of the organization.
A 2019 Forrester report on the total economic impact (TEI) of Planful revealed that companies deploying the platform could see savings of up to $1.2 million over the course of three years and ROI of up to 393%. Clearly, switching to this technology is about more than just closing the month out quickly. It’s also about saving the business lots of money.
Keep these numbers in mind as you investigate bringing an FP&A platform into your finance department and continue your journey toward a faster, smoother month-end close.