Want a Smoother Year-End Close? Get it Right Each Month and Quarter

When it comes to a smoother year-end close, the more seamless the monthly and quarterly closings are, the better. By establishing solid processes for monthly and quarterly closings, organizations can set themselves up for a smoother year-end close with a lower risk of surprises.

It’s a Vicious Cycle – That Repeats

More often than not, the year-end close and reporting cycle is a stressful process that goes on for weeks or even for months. From the collection and consolidation of financial results, to the creation of year-end financial statements, to audits and regulatory filings – finance teams are often distraught throughout the process.  But thanks to technology, the process need not be such a stressful and painful affair anymore.

Complexities of the Financial Close

The financial close and reporting process is like a nesting doll. There are a lot of sub-processes embedded within the main process. It usually begins with the collection of financial results from multiple systems, divisions, and subsidiaries with each having their own charts of accounts and business practices. These results then require consolidation following US GAAP or IFRS guidelines.

If the business operates in different geographies there will be the additional complexity of multiple currency conversions, intercompany reconciliations and accurate accounting of minority interests. Period-end account reconciliations themselves can run into hundreds and thousands and there are typically many changes and adjustments required before the CFO is ready to sign off on the financial results.

Leveraging spreadsheets and email to manage the financial close and reporting process may work for smaller companies with simple requirements. But as organizations grow and evolve in complexity, the collection and consolidation of multiple spreadsheets can cause errors and omissions. Regardless of the technology and tools used, in order to avoid problems at year-end, the overall approach and process itself must be solid.

Lessons Learned from War Stories

At the recently-held webinar, War Stories from the Fiscal Year-End Close and Reporting Season of 2016, sponsored and led by Planful, the focus was on learning from the mistakes of the past and trying to formulate a new approach in 2017. The intent was to look at best practices that can be implemented through experience and avoid the pitfalls that organizations encountered in 2016.

Many issues were highlighted during the session: from process issues to the limitations inherent in spreadsheets and legacy applications. The panelists explained how cloud-based EPM software can be leveraged to streamline the year-end close and how the process itself required tinkering and a rethink in terms of approach and execution to acheive success.

When working toward a smoother year-end close, it is important to evaluate the monthly and quarterly close processes. If there are bottlenecks or oversights in the monthly financial close and reporting process, these issues can be magnified in the year-end close process as a Cascade Effect. A Cascade Effect is an inevitable and sometimes unforeseen chain of events due to an act affecting a system. Careful review and optimizing of the monthly and quarterly processes can be key to mitigating an extended year-end close cycle.

Automate and Accelerate

Automating as many processes as possible can reduce the chance of errors and increase the speed of the financial close. One of the biggest advantages in closing the books and delivering results sooner is to make time for more business analysis and evaluation of new business opportunities.  The cascade effect need not always be a destructive process.

While a poorly run month-end close process can set off a chain of events that negatively affects the year-end close, a solid monthly process can have positive downstream effects. The faster and more accurate the month end close and reporting process, the better chance companies will have for a smooth year-end close.

Attend to Reconciliations Early

A big challenge in the year-end close process is account reconciliations. If these are performed and signed off on a monthly basis, there will be less work required come year-end. When it comes to intercompany account reconciliations, resolving out-of-balance issues each month rather then plugging the difference and kicking the can down the road will make the year-end close process much smoother.

Cloud-Based EPM is Your Friend

With Cloud-Based EPM software, automating processes has never been easier and, EPM software implementation has never been faster. The month-end close and reporting cycle can become a routine and streamlined process, setting off a chain reaction of efficient processes that lead to a smoother year-end close.

Many organizations perform their year-end, quarter-end, and month-end close and reporting processes using Planful cloud-based EPM solution. These companies have replaced either spreadsheets or legacy, on-premises applications with our cloud-based EPM platform and the results speak for themselves.

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