Accelerating the completion of the accounting cycle remains an important objective for Finance organizations. Research shows that about half of the midsize and larger companies take more than five business days to close their books on a monthly or quarterly basis; some much longer. A fast, accurate close is important if only because it enables companies to provide financial feedback to executives and managers sooner and therefore allows them to address issues or opportunities faster. One of the most important insights provided by Ventana’s Research Benchmark on the financial close is that cutting the time to complete the accounting cycle is rarely a matter of finding one or two bottlenecks. Like most management challenges, it is almost always a matter of addressing a large number of small things, which in aggregate add up to days or weeks that can be saved. Moreover, the research also shows that companies that have established clear objectives to shorten their closing cycle and ones that have frequent formal periodic reviews of their process execution (at least monthly or quarterly) are more likely to succeed in reducing the time it takes to close the books.
Consolidation software that enables companies to manage their financial close has been around for about a quarter century. Most packages are very mature and offer the same basic features and functionality. One of the bells-and-whistles I’d like to see, though, is a dashboard that visually presents the closing process from inception to completion in a Gantt chart format. This could be for the current month, quarter or year, to keep tabs on things, or it could be used to examine past closes to identify opportunities to save time and highlight the source of delays and so assist in developing priorities for improvement.
Corporations that take more than a business week to complete their close (that is, those with below average performance) need to examine the various people, process, information and technology factors that may be preventing them from closing faster. People issues include training and communications; process includes sequence, timing, hand-off issues; information involves the availability and accuracy of the data; and technology includes software/ hardware/network issues. The value of a time-sequence based dashboard is that it can help the controller/CFO understand where opportunities to shorten the close may exist.
All (or almost all) of the data necessary to create a Gantt-style closing dashboard chart is already being collected by the consolidation software and, in theory, any organization could create its own close management dashboard. But it’s unlikely that more than a small minority of companies will want to make the investment, which is why it would make sense for vendors to put some of the maintenance dollars they receive into creating a useful dashboard to help companies achieve a faster, clean close. This is all about being smart and effective in finance that I outlined at the beginning of 2010.
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Regards,
Robert Kugel - SVP Research