Financial close is directly connected to the financial management transformation happening right now. On the one hand, this transformation is about digitalisation. It requires us to re-think our processes and integrate new solutions into our daily operations. On the other, the transformation is about the purpose of finance within business. The finance function is changing from a basic operational mode to an essential aspect of business support. This is the new challenge of finance – to become a reliable and agile business partner. In other words – it is about faster and more accurate financial reporting and ultimately an efficient financial close.
Why does an efficient financial close process matter?
“Speed in business is king. The faster your finance can close the books, the more time your business leaders will have to prepare for management and board meetings, financial reporting, and decision-making,” says Dan Ahlstedt, former CEO of SAP Finland. Agile and informed decision-making requires timely and accurate financial reporting and finance plays a big role in supporting business.
Speed without data accuracy, however, is nothing. Some might argue that speed is achievable at the cost of quality, but this is not entirely true. Spending more time on one process does not guarantee data quality however manual work combined with a lack of clear process can actually increase to the risk of inaccurate financial statements.
What slows down the Financial Close process?
There may be multiple external factors contributing to a slow close process, however, here we would like to concentrate on bottlenecks within financial management.
Poor close task management
Lack of a comprehensive closing task list and proper communication within the team. Quite often, finance teams rely on shared spreadsheets to track close tasks. There can be tens or hundreds of accountants performing these tasks, recording their actions in the file and passing on this information to team members via emails. Obviously, this approach consumes a lot of time; it is unreliable and can be very chaotic under strict time pressure. It also has no ability to monitor that tasks are being performed on time.
Too many manual processes
This is particularly a result of the monthly account reconciliation and manual journal entry process. Typically, finance teams have to go through hundreds of general ledger accounts, export account balances and compare them with sub-ledgers or bank statements. In case of discrepancies, manual journal entries are needed to correct balances in the accounts. However, with intelligent automation, balances from the general ledger can be retrieved automatically, large numbers of low-risk accounts can be reconciled automatically and journal entries can be imported into an ERP system with one click.
Finance teams are overloaded with corporate governance and compliance requirements
Without proper processes and tools, this can significantly reduce the speed of close. With no means of systemic control, teams are forced to involve more people for each task to control execution.
Teams operate inadequate financial systems to manage close
Accountants typically would switch between various offline systems to perform one task. This is usually because the systems in use are outdated, functionalities are limited or there is no direct integration to the ERP system. As a result, a lot of time is spent on working around system limitations and very little time is left for reviewing and analysing the results. The role of intelligent process automation solutions here is to allow accountants to perform all close tasks from one place, which connects to the ERP systems in real-time.
Why isn’t robotic process automation (RPA) enough to improve financial close?
While RPA can be a fairly easy first step to automation, finance teams have to take into account the specifics of the financial close process and some of the shortcomings of RPA.
RPA solutions are for non-cognitive tasks
RPA solutions are good at executing repetitive high volume accounting tasks with little to no exceptions. Most financial close tasks, however, don’t meet these criteria. Close tasks are time-consuming, highly cognitive, requiring skilled judgement and differ case by case.
RPA doesn’t solve the lack of financial close process visibility
RPA doesn’t solve the lack of financial close process visibility, which perhaps is one of the biggest challenges. Being able to monitor all completed and due close tasks as well as responsibilities in real-time is essential. When utilising RPA solutions, accounting teams have to think about control points to ensure that tasks are completed as they should be.
RPA is not a collaborative solution
RPA solutions are designed to mimic manual and repetitive human interactions, but don’t have collaborative capabilities. So there is no capability to keep humans in the loop for exceptions or approval workflows required by internal or legal compliance regulations.
RPA is not a ready-made solution
RPA is not a ready-made solution. For the most part, RPA application within finance is a work in constant progress. Planning, developing, documenting, testing, launching projects and analysing performance is part of the RPA project cycle of any company. Project execution can take anywhere from 2 to 6 months with extensive involvement of IT.
Why does Financial Close require intelligent process automation?
An efficient financial close process can be described as fast, accurate and executed in a controlled and compliant manner. Intelligent process automation delivers exactly that. It is a combination of RPA-like capabilities with respect to manual task automation alongside precision and more cognitive process management capabilities like smart workflows and process visibility.
Control and visibility
Intelligent process automation ensures control and visibility. The saying “you cannot manage what you do not measure” is very true also about financial close. The ability to monitor due tasks, distribute workload, assign responsibilities and follow clear completion actions is a must to turn close from stressful chaos to a transparent and organised process.
Ready-made for financial close
Unlike RPA bots, intelligent process automation solutions are ready-made for specific functions/processes. In other words, all functionality is designed with deep knowledge of financial management challenges and best practices. That’s why an intelligent process automation solution will deliver not only speed and accuracy but will also include the means to meet corporate and legal compliance and ensure audit trails.
Customisation capability
The bigger and more complex an organisation’s financial management is, the greater the need for tools that adapt to business specifics. So, intelligent process automation solutions can be customised to align with a company’s internal processes.
Real-time integration to ERP systems
Another major difference is pre-built integration into the ERP system, which enables data validation in real-time and helps the end-user to handle these errors in the user interface.
The combination of all these capabilities is exactly what an efficient financial close process is all about – tracking and executing various tasks in a controlled and compliant manner from one place.
About Aico
Aico helps mid to large-size companies deliver their financial close process up to 50% faster. Our solution is a ready-made intelligent process automation platform to manage key financial close processes like close task management, account reconciliation, and journal entries. Book a live demo to find out how Aico can help transform your financial close:
