Organizations have long sought ways to achieve a fast but “clean” (accurate) financial close. The most widely accepted benchmark is to be able to close within one business week. Organizations that close within a business week are almost always more competent in how they manage the process and therefore use resources more efficiently. Also, organizations that close their books within six days after the end of the quarter are more likely to provide executives with timely information and respond to markets and competitors with greater agility. While there have been some improvements in efficiency from modern accounting systems, our research shows that one-half of organizations still take more than a business week to complete their quarterly close.
The obstacles to a faster close are not innate but rather the result of poor process design and execution as well as insufficient automation of the process. The accounting close can be bogged down by a variety of time consuming and inefficient manual tasks. Our Office of Finance Benchmark Research found that automation is correlated with achieving a faster close. Ventana Research gave Trintech its 2020 Digital Leadership Award for exemplifying leadership in the applications and technologies that support the office of finance.
Trintech provides software that manages the record to report (R2R) cycle for the office of finance. Organizations use R2R software to promote a faster close, enhance staff efficiency, improve resource utilization, achieve cost savings, reduce risks and deepen visibility into the status of the process. Trintech’s cloud-based Cadency software is designed to enable larger organizations (typically those with 1,000 or more employees) to manage financial close activities end to end in a unified process, including operational matching, intercompany transaction management, balance sheet reconciliations, journal entry management and close task management.
Trintech’s recently introduced CadencyDirect uses the ServiceNow platform to enable accounting organizations to replace manual and siloed financial processes with automated workflows that span the entire organization. CadencyDirect provides Controllers and Chief Accounting Officers (CAOs) a summary of their readiness to close and identifies any risk to the process that requires their attention. Close automation software enables finance teams to standardize best practices even in complex accounting processes across the entire organization; reduce risks; and accelerate the close.
By providing executives and managers with information about the organization’s performance sooner, a faster close also promotes agility in responding to markets and competitors. It frees up departmental resources to enable CFOs and controllers to fix process issues that hamper the effectiveness of the department, and allows extra time to concentrate on more valuable analytical tasks, including crafting the management discussion and analysis (MD&A) narrative that accompanies the presentation of periodic financial statements. Our research shows that 88% of companies that apply a substantial degree of automation to their close process can close their books within six business days compared to only 40% of those that apply little or none.
Cadency’s System of Accounting Intelligence (SOAI) allows organizations to combine advanced automation technologies, such as artificial intelligence (AI), robotic process automation (RPA) and bots, to streamline the close and better utilize the time and talents of the accounting staff. It also allows for communication between systems of record, such as ERP, and the system of controls. It consists of APIs, ERP connectors, and third-party RPA connectors, thus reducing the cost, time and risk of data integration.
RPA is an important technology that can serve as a cornerstone of the digital-enabled finance organization. This technology can automate a wide range of rote routines that today must be handled by individuals, for example, collecting data from multiple systems or spreadsheets and entering it into another system. AI can be used to scientifically determine risk and drive better outcomes more flexibly that a fixed rules-based system because the determinations are based on contextual data that is continuously updated. For example, as a journal entry is created, AI can determine the risk of errors and omissions in real time by detecting missing elements typos as well as out-of-range or inconsistent values. The system can then immediately notify the individual making the entry of the deviation from the normal pattern, enabling them to review it and correct it. By eliminating errors and inconsistencies at their source, AI cuts time spent on finding mistakes and making corrections as well as enhances the quality of an organization’s financial statements.
Adra by Trintech is financial close and reconciliation software designed for midsize organizations. The suite includes Adra Matcher, which automates transaction matching; Adra Balancer, a balance sheet reconciliations platform; Adra Task Manager, a project management tool for financial close; Adra Analytics, which provides full visibility into the close process; and, depending on region, Adra Accounts. Adra Analytics was released last year and enables organizations to continuously improve the close process by providing data independence and reporting flexibility, while also helping to identify issues related to the close process and evaluate performance trends.
Automation can improve a finance department’s performance by managing the close process more efficiently and more effectively. I recommend that organizations looking to shorten their close and accelerate the entire R2R cycle should evaluate the capabilities of Trintech when evaluating vendors for financial close automation.