Automation has helped improve the efficiency and accuracy of the month-end close, but finance departments still feel pressure to close the books faster.
Two recent surveys by software providers underscore several key issues facing finance professionals 12 times a year:
- 87% said they worked overtime during the financial close process, according to a survey by Adra.
- 60% said stress levels rise during the month-end close, according to survey by FloQast, and one-fourth of respondents said the pressure related to closing has resulted in employees leaving their organization.
- Many respondents don’t have full trust in the accuracy of their reported numbers. Three-fourths of the FloQast respondents said they are not fully confident in the accuracy of their last close, and 55% in the Adra survey said they trust 100% in their reported numbers.
The struggles come from a process that is seen by some as inefficient, even though efforts to streamline it have improved somewhat.
For example, 90% said two years ago that they were under pressure to close faster, compared with 78% in the current Adra survey. In 2013, 39% were satisfied with the quality of the close process, and that satisfaction now stands at 46%. The time to complete the close has dropped some over the years: 29% need at least seven days to complete a month-end close, down from 33% in 2013.
Several pain points exist for finance departments trying to improve their month-end close. In the FloQast survey of 259 who had responsibility for month-end close, 71% said their process was “tribal knowledge,” where individuals know processes and personally pass along information as needed, instead of documented.
The process can be complicated. The FloQast report noted several complications: Knowing whom to get information from and how to pull it consistently, understanding internal policies and procedures to calculate adjustments properly, mapping key expenses to the right accounts. “If any one of these things [is] done inconsistently, the month-end close and key business reports will be unreliable,” the report said.
Many (73%) are still operating in a manually intensive, spreadsheet-driven system that limits or takes away entirely any time for analysis (66%), according to the Adra survey. In that survey, 84% said they would prefer the financial close process to take up less time that could be devoted to more strategic financial projects.
Other top obstacles cited in the Adra survey are:
- Coordinating and getting information from other departments (54%).
- Reconciling across multiple systems (44%).
- Disparate, nonstandardized processes (44%).
- Coordinating across multiple departments (38%).
- Not enough resources to manage workload (31%).
—Neil Amato (Neil.Amato@aicpa-cima.com) is a JofA senior editor.