Efficient financial closing is crucial to any company’s financial department performance. However, not all companies excel in this area. To find out what sets high-performing companies apart, the EY Closing Excellence survey research from 2021 analysed companies in Sweden, Norway, Denmark and Finland.
The survey found that larger companies with many full-time employees show clear differences in performance. Top performers complete monthly reports in six working days, while the average company takes 12. The gap is even wider for quarterly and annual reports, with top performers finishing up to 16 days faster.
High-performing companies understand financial closing best practices, especially the importance of data quality and consistency. This way, they use preventative controls and invest in data science competencies. In contrast, the population average must work on updating their IT systems and improving their process efficiency to eliminate manual work.
These are the best practices based on the survey:
Average companies spend 20 days on quarterly reports. However, top performers spend only 11.
Top performers have not been able to improve their performance in fewer than 11 days since 2018, which could be due to higher demand for the reports.
Top performers spend around 23 days on annual reporting, with an industry average of 39 days.
Clear process descriptions and flowcharts are essential. Half of top performers document key processes in detail, while the other half do so for all major processes. In contrast, average companies map only 43% of key financial processes and 36% of major ones, with 21% lacking critical process mapping altogether.
If you want to improve the way you close your books, here are the top five practices that distinguish top-performing companies from average ones:
Integrate your IT systems: Half of the top-performing companies and 45% of average companies prioritise integrating their information technology to improve the closing process.
Standardise your systems: Using standardised systems, half of the top-performing companies and 45% of average companies ensure consistency and efficiency.
Develop data science competencies: While only 20% of top-performing companies invest in data science, this can be a significant advantage in optimising the closing process.
Train your employees on IT systems: Only 20% of top-performing companies and 10% of average companies prioritise educating their employees on IT systems, but this can make a significant difference in the effectiveness of the closing process.
Remember that the financial close process affects many other financial close activities in your organisation, so improving it can have a positive ripple effect throughout your company.
The survey suggests CFOs should prioritise automation and enhance agility and quality in financial close processes. This frees finance teams to focus on high-value tasks. While automation and shared service centres are common, the biggest cost savings come from process optimisation, better data, and improved IT infrastructure, including standardised ERP systems.
According to the survey results, 40% of participants identified that the primary challenges with automating financial closing activities were the need to update IT systems and a need for IT integrations.
In addition, 70% of participants reported that the primary internal challenge with closing was the use of inefficient processes that required many manual routines and iterations.
Lastly, 70% of the respondents revealed they need to devote more attention to developing and training their employees.
Efficient financial closing ensures timely, accurate reporting, enabling better decision-making and regulatory compliance. A faster close frees up resources for strategic tasks, improving overall business performance. By streamlining processes and leveraging automation, companies can reduce costs and enhance financial transparency.
In conclusion, process efficiency, data consistency and system integration are fundamental to achieving a faster financial closing process. Implementing these elements can lead to increased visibility of the end-to-end process. Tools like Aico can make achieving these objectives much more manageable by directly integrating multiple instances of corporate ERPs. Aico integrates with all ERP systems, such as SAP, Oracle and Microsoft Dynamics. Aico can handle multiple ERPs and even accounting concepts simultaneously in a single instance of Aico.
This makes management easy and guarantees low TCO (total cost of ownership) over time. Aico also supports change management, such as migration from one ERP to another, or organisational changes. Simultaneous real-time integration to ERPs is the heart of the Aico system. By integrating it with your ERP system, you can easily connect automated reports with automated notifications and manual tasks. This integration allows your team to initiate, track, and configure automated tasks more comprehensively.
That would eventually lead your finance team closer to top performers.