Over the past decade or so, there have been numerous publications on Transforming the Finance Function from being a cost unit to a value adder.
Finance professionals once responsible for routine transactional duties are now constantly being encouraged to streamline these routine processes and spend more time and efforts on initiatives which add value to the business.
As a result, many organizations have incorporated Shared Service Centres (SSC) or outsourcing arrangements within their business models leaving ample time for the management accountants to focus on value-adding tasks such as financial planning and analysis.
Unfortunately, little progress would appear to have been made.
One report published by KPMG on Current Reporting Performance reveals that many organizations are still experiencing longer reporting timescales, sometimes spanning into months, further questioning the reliability of such information for strategic decision making.
In order to improve its closing process, the finance department needs to:
Recognize the benefits of faster reporting. Other than cost savings in the form of reduced headcount or hiring of fewer temporary staff, the organization can also benefit from improvements in the level of support provided to the business as there is more time for decision support and improvements to the external image of the organization and the internal reputation of the finance function.
Identify the factors that drive faster reporting and those that prevent faster reporting. Examples of the former include improved data communications, involvement of managers from disciplines other than finance and increased investor activism. Examples of the later include increased external regulation, cultural issues or poor processes.
Address people and cultural issues. Resistance to change is one of the reasons why many organizations experience longer reporting timescales. A new reporting software or timetable might not necessarily deliver faster reporting.
To achieve local buy-in, management need to regularly communicate the reasons for the change, emphasize the benefits (to individuals and the organization) of making the changes, act as champions/change agents of the project and arrange comprehensive training for personnel.
Understand and improve the key stages that characterize the closing process. These include pre-close, operate unit closing, data transmission, consolidation and reporting.
Knowing and understanding the linkages between these stages is key to improving the reporting cycle and achieving considerable time savings.
Management need to also realize that a major investment in IT alone is not a necessary part to reduce reporting timescales.
Nonetheless, significant benefits can still be achieved through investment in IT as long as appropriate software choices are made.