Automation: The Key to Reducing Your Financial Close & Reporting Period

Ask any finance person what is it that they like less about their job, chances are that they will tell you it is closing the books at period-end. Why is this the case? For many finance functions, the financial close period (month-end, quarter-end and year-end) is one of their most stressful seasons.

Emotions and tempers fly high. Team members put in long hours just to balance the books.

I have heard cases of teams knocking off after midnight for a couple of days and always ask myself why. Expressions such as “I am working late because it’s month-end, quarter-end or year-end” are starting to sound off like a cliché.

Are Finance teams swamped with work to such an extent that they are unable to complete their tasks within the normal working hours of the day or month? Maybe it’s tradition that must be preserved at all cost?

I am not trying to make myself a saint here. I too am a culprit. I have put in long hours at month-end or any other period-end close more than I can remember, and when I reflect back, most of the tasks that I put in the long hours for were mundane and not worthy of their time allocation.

In my experience, there are two main reasons why Finance teams find themselves working round-the-clock at the end of each financial close period – 1) Complacency and 2) Procrastination.

Complacency is the enemy of progress.

It is a common practice for humans to remain satisfied with the way things are and resist any meaningful change. Fear of the unknown makes us skeptical to embrace change.

What we forget is that not all change is bad. As much there is change associated with negative consequences, there is also a type of change associated with positive results.

Although technology has evolved over the years, it seems as if this new dawn is yet to reach the Finance function. In a number of companies, Finance has been very slow to adopt new enabling technologies in order to drive financial process efficiencies.

Take financial reporting as an example. Company stakeholders are increasingly demanding CFOs to deliver better and easy to understand performance information, more timely and credibly. Despite this need, Finance teams are still heavily reliant on manual extraction processes, and delivering stale information.

Finance people are spending a significant amount of time trying to manually consolidate company financial performance results.

So often Head Office teams patiently wait for subsidiary companies to send through their management packs for Group consolidation purposes and when they do reach the Head Office, they have not balanced and contain errors.

The Head Office team sends the management pack back to the subsidiary for rectification. If the latter is unable to rectify the errors, it automatically becomes the Head Office’s problem. This back-and-forth process results in unnecessary effort and time-wasting rework.

Love it or hate it, Excel is here to stay. Nonetheless, I believe there is a place for Excel and not all financial functions are easily performed with Excel. It is high time CFOs acknowledge the limitations of manual extraction processes and leverage financial consolidation software.

Automating consolidation functions results in reduced cycle times of discrete tasks, more accurate results at a lower cost, and also provides management with improved visibility and control, allowing for improved decision-making.

We Will Correct the Errors Later

Many at times procrastination has resulted in Finance teams working longer hours than they should. Accounting errors identified early in the month are not resolved immediately. Rather, the slogan is “We will correct the errors at month-end”.

When month-end comes, because of other issues at hand, these errors are easily forgotten and left to accumulate. What could have been resolved in one month ends up not getting resolved for another six months or so.

An example of this would be a clearing account that is not reconciled on a monthly basis. The balance is allowed to grow month-on-month until there is no more control and visibility of the account.

When the year-end comes, the external auditors want a precise explanation of the item movements within the account but nobody has a clue of when did the problem start and what exactly went wrong.

The auditors make note of a possible adjustment to the financial statements unless clarity is given.

Because the company is not prepared to write-off the adjustment to the income statement, the CFO reassigns resources to work on the clearing account, resulting in excessive time being spent trying to make sense of the historical items and movements.

It is therefore imperative that as soon as accounting errors are identified, these should be rectified in the same period identified.

Fast-Changing Environment Accelerating the Need for a Faster Close

In today’s fast-changing environment, companies need the ability to make better decisions and at a moment’s notice. Changes are happening must faster than before and because of this quickening pace of business, CFOs will forever be under immense pressure to shorten the time-frame of closing the company’s books and finalizing all financial reporting needs.

Regulators, rating agencies, investors and other stakeholders are increasingly scrutinizing company financial results, at the same time asking to receive this information sooner than later. This leaves little room for financial close and reporting processes that require an overabundance of patience or are lacking in clarity and precision.

Despite dramatic improvements in financial technology over the years, why then are CFOs reluctant to upgrade their company’s current systems? Are they dealing with competing priorities? Is it because they view investment in new financial software as a cost rather than an enabler of business performance?

In order to become effective business partners, the office of Finance needs to abandon its “wait-and-see” approach, become more proactive and invest in tools that help accelerate the financial close process and advance the CFO’s role, making it more and more strategic.

Automation is not meant to oust employees. Instead, automating routine financial processes shortens the period-end close and enables Finance to get involved in high-level tasks such as interpreting and analyzing data, generating insights, managing emerging risks and driving strategy execution.

For example, by investing in e-procurement software instead of relying on a highly manual, paper-driven P2P process, CFOs are able to monitor the company’s cash flow position in real time and take advantage of early-discount opportunities.

As the pace of business change continues to accelerate, Finance has to keep up, take a real-time overview of the entire close process, and address the areas that need improvement.

By incorporating technologies, streamlining processes, and reassigning employees, Finance can build a better-documented, more efficient and accurate financial close.

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One Reply to “Automation: The Key to Reducing Your Financial Close & Reporting Period”

Rajesh Sharma says:

February 16, 2019 at 5:43 am

Great description of The Key to Reducing Your Financial Close & Reporting Period. This article is very informative. In this article, it is mentioned how to manage your time by not doing overtime just because it is the month end. This article has indicated everything you need to know. It is informative and educative. Thank you for posting this article.

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The Art of Risk Management

This is the title of the article by BCG published a few years ago. The article discusses the principles that should govern the approach to risk management by companies of all shapes and sizes.

The authors make several points with which I agree. Here are some excerpts:

Risk management is essential in today’s volatile economy. In a continuously changing economic environment, companies cannot assume a stable risk landscape.
Stop thinking of risk management as primarily a regulatory issue. Embed risk management in the mindset of the broader organization.
Risk management is a value-creating activity that is an essential part of the strategic conversation inside the company. The goal of that discussion should not be to eliminate or minimize risk but to use it to create a competitive advantage.
Risk management starts at the top. The organization needs to demonstrate that it has made risk management a high priority and an integral part of the decision-making process by appointing a dedicated risk leader who reports back frequently to the CEO and the board to discuss the latest trends and any changes in the company’s risk scenarios.
Risk cannot be managed from an ivory tower. Risk Management should not exist in isolation from the rest of the organization, with an insufficiently granular understanding of the actual business-specific risks the company faces. To avoid this outcome, integrate risk management into the company’s entire routine management processes, including planning, capital allocation, controlling, and reporting.
- Understand the scope of the risks the company faces.
- Plan for how the company will manage those risks.
- Act to mitigate the risks or take advantage of strategic opportunities.
Avoid relying on black boxes. Although sometimes appropriate, over-reliance on complex metrics or models can muddy the risk management process, turning it from a transparent management activity into a frustrating black box. The appropriate level of complexity is company-specific and depends on the industry, business model, availability of data, level of experience, and mandatory legal requirements.
Align risk management with a company’s overall business strategy. Companies need to identify all relevant risks – not just those that can be easily quantified. Some of the relevant risks for a company may be those that are qualitative and especially difficult to quantify.
Risk management is more than a policy; it is a culture. The objective of a company’s risk-management system should be not only to enforce new policies but also to create a risk-aware culture that addresses risks proactively, not reactively, and manages them to create new sources of competitive advantage.
Effective risk management depends on the free flow of information throughout the organization. Unless employees at all levels of the organization are actively involved in the risk management process, it will be difficult to maintain the unrestricted flow of information. This can result in the most important data getting buried in one part of the organization unavailable to other parts of the business.
Risk management deals with uncertain futures. As a result, the goal should not be to develop precise metrics or future outcomes but to strive for a general understanding of the probabilities and potential impact of various trends or scenarios on business performance and enable decision-makers to confront the uncertain nature of risk and act accordingly.
Risk management is never about finding “the answer.” Rather, it is about continually refining the organization’s assumptions about the future and its understanding of the implications of those assumptions for the company’s business. Assumptions about risk often change quickly, so the relevant parameters, probabilities, impacts, and correlations should be revisited frequently.
It is possible to prepare for unknown risks by building an organization that so excels at crisis management that it is resilient even in situations in which it is blindsided by unprecedented challenges. For example, through developing the ability to detect, capture, and exploit information patterns as well as to think outside existing frameworks and risk landscapes.
Avoid the downside, but don’t forget the upside. Companies should use risk management also to identify new opportunities and to exploit them systematically. For example, scenario planning should be used to define not only worst-case scenarios but also best-case scenarios. Think in advance about how a company can make the best use of the latest market developments and trends and ultimately make the right decisions.

I enjoyed reading the article and highly recommend it.

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Leading in Uncertain Times

One of the biggest challenges facing business leaders today is making the right decisions that will ensure their organizations succeed, survive, and remain competitive in an increasingly uncertain and complex environment.

A recent post, The best way to lead in uncertain times may be to throw out the playbook, by Strategy+Business has several good points.

The article is about the COVID-19 pandemic, how global companies navigated through the crisis, and how best to prepare for future disruptions. Here are some key points and my comments.

Rather than follow a rigid blueprint, executives must help organizations focus on sensing and responding to unpredictable market conditions.
- Comment: Senior leaders play a vital role in providing clarity about the organization’s strategic direction, creating alignment on key priorities to ensure the achievement of enterprise objectives, and ensuring the business model is continuously evolving to create and capture value in the face of uncertainty. They must not rest on their laurels and stick to the beliefs and paradigms that got them to where they are today and hope they will carry them through tomorrow. Regulatory changes, new products, competition, markets, technologies, and shifts in customer behavior are upending many outdated assumptions about business success. Thus, the businesses you have today are different from the ones you will need in the future hence the importance of continuously sensing changes in the global economy. Employees and teams often feed off the energy of their leaders and tend to focus their attention where the leader focuses attention. If the leader is comfortable with current business practices and rarely embraces the future or challenges the status quo, then the team is highly likely to follow suit.
When it became clear that supply chains and other operations would fracture, organizations began scenario planning to shift production sources, relocate employees, and secure key supplies.
- Comment: Instead of using scenario planning to anticipate the future and prepare for different outcomes, it seems most of the surveyed organizations used scenario planning as a reactionary tool. Don’t wait for a crisis or a shift in the market to start thinking about the future. The world is always changing. As I wrote in The Resilient Organization, acknowledge that the future is a range of possible outcomes, learn and develop capabilities to map out multiple future scenarios, develop an optimal strategy for each of those scenarios, then continually test the effectiveness of these strategies. This does not necessarily mean that every change in the market will impact your business. Identify early warnings of what might be important and pay closer attention to those signals. In other words, learn to separate the signals from the noise.
The pandemic forced the organization’s senior management team to re-examine how all decisions were made.
- Comment: Bureaucracy has for a very long time stood in the way of innovation and agility. To remain innovative and adapt quickly in a fast-changing world, the organization must have nimble leadership and an empowered workforce where employees at all levels can dream up new ideas and bring them to life. Identifying and acting on emerging threats and potential opportunities is not the job of the leader alone but every team member. To quote Rita McGrath, in her book Seeing Around Corners, she writes, “Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision-making is often locked in individual brains.” In addition to the internal environment, the leader must also connect with the external environment (customers, competitors, regulators, and other stakeholders), looking for what is changing and how.
It’s worthwhile for leaders of any team to absorb the lessons of sense-respond-adapt, even if there is no emergency at hand.
Sensing: Treat the far-flung parts of your enterprise as listening stations. The question leaders must ask is, “What are we learning from our interactions beyond the usual information about costs and sales?” Train your people to listen for potentially significant anomalies and ensure that important information is not trapped in organizational silos.
- Comment: Cost and sales data are lagging indicators that reveal the consequences or outcomes of past activities and decisions. Although this information can help leaders spot trends by looking at patterns over time, it doesn’t help understand the future and inform what needs to be done for the numbers to tell a different story. In addition to lagging indicators, pay attention to current and leading indicators and understand the relationship between these indicators and outcomes.
Responding: Improve communication across intra- and inter-organizational boundaries. Leaders should view business continuity as an essential function that acts as connective tissue for the enterprise.
- Comment: In addition to creating mechanisms that allow the free flow of information both inside and outside the organization, decision-makers should also be comfortable receiving information that challenges their personal view of the world, even if it’s not what they want to hear. Create a culture of psychological safety where people are not afraid to share bad news for fear of getting punished, but rather are acknowledged and rewarded for speaking up. Leveraging the diversity of thought enables leaders to anticipate the future as an organization, decide what to do about it collectively, and then mobilize the organization to do what’s necessary.
Adapting: Challenge assumptions, and question orthodoxies. There’s always the temptation to mitigate threats simply by applying existing practices harder and faster. One way to get at those deeper issues and encourage double-loop learning is to ask, “What needs to be true for this to be the right approach?”
- Comment: In an increasingly uncertain environment, it’s difficult to survive and thrive with an old business model or outdated technologies. Many businesses fail because they continue doing the same thing for too long, and they don’t respond quickly enough and effectively when conditions change. As a leader, stay curious and connected to the external environment, look for market shifts, understand what needs to be regularly refreshed and reimagined, adopt new technologies and capabilities, and adapt in ordinary times but also during times of transition. Unfortunately for many leaders, it’s just more convenient for them to continually downplay the fact that conditions are changing than take the appropriate course of action that drives business success.

How are you preparing your organization for potential future disruptions?

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The Collaborative Organization

These days the term collaboration has become synonymous with organizational culture, creativity, innovation, increased productivity, and success.

Let’s look at the COVID-19 pandemic as an example. At the peak of the crisis, several companies instructed their workers to adopt remote working as a health and safety precautionary measure.

Two years into the pandemic, they are now asking their employees back to the office full time or are planning to adopt a hybrid model.

The need to preserve our collaborative culture and accelerate innovation are two of the top benefits being cited by organizational and team leaders for bringing workers back.

Collaboration is indeed essential for the achievement of team goals, functional objectives, and the overall success of the organization.

Today’s breakthrough innovations are emerging from many interacting teams and collaborative relationships.

When teams, functions, and organizations collaborate, the whole is greater than the sum of its parts; group genius emerges, and creativity unfolds.

But, what makes a successful collaboration? What are the key enabling conditions?

It extends beyond the boundaries of the organization. Business success is a function of internal and external relationships. Instead of viewing your business in vacuo, understand that you are part of an ecosystem. External to your organization, who do you need to partner with to enhance your value creation processes, achieve/exceed your objectives, or successfully execute your strategy?
Ensure the objectives are clear and there is shared understanding by everyone. Unclear objectives are one of the topmost barriers to team and organizational performance.
Foster a culture that encourages opinions and ideas that challenge the consensus. People should feel free to share their ideas and not hold back for fear of others penalizing them or thinking less of them. Collaboration is hindered when one or two people dominate the discussion, are arrogant, or don’t think they can learn anything from others.
Groups perform more effective under certain circumstances, and less effective under others. There is a tendency to fixate on certain topics of discussion amongst groups which often leaves members distracted from their ideas. To reduce the negative effects of topic fixation, members of the group should be given periods to work alone and switch constantly between individual activity and group interaction.
Effective collaboration can happen if the people involved come from diverse backgrounds and possess complementary skills to prevent conformity. The best collective decisions or creative ideas are often a product of different bodies of knowledge, multiple opinions, disagreement, and divergent thought processes, not consensus or compromise.
New technologies are making collaboration easier than ever, enabling us to increase our reach and broaden our network. Although new technology helps, it will not make your organization collaborative without the right culture and values in place. First, define what you want to achieve through collaboration then use these tools to promote creative collaboration.

How else are you championing collaboration within your organization to create value and succeed?

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Automation: The Key to Reducing Your Financial Close & Reporting Period

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