- New Chapter Begins Remote Financial Closings
A New Chapter Begins for Remote Financial Closings
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février 01, 2021
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Financial close and reporting has always required close collaboration, strong orchestration and precision — all on a tight deadline.
With the onset of COVID-19, entire workforces have been largely restricted to working offsite, making financial close and reporting particularly challenging. Collaboration, orchestration and precision remain essential, but ensuring accuracy and managing deadlines and people with a dispersed team can lead to problems such as a lack of accountability, miscommunication and loss of control.
No matter the business climate — or how effective your current remote financial close and reporting process is — there are always ways to improve accuracy, efficiencies and timeliness that can provide short- and long-term gains. The key is to focus on three primary areas within your organization during the close process: technology, governance and communication.
Leverage Technology to Automate and Manage the Close Process
Companies can further streamline existing financial close and reporting processes and provide greater visibility, efficiency, speed and accuracy by taking advantage of the latest technology. Specifically designed close management and automation software allows for process automation and simplification. The main functionalities and modules enable companies to enhance and automate some of the following:
- Task management: Software can embed the company’s close checklist and carry out necessary close tasks, as well as determine the frequency and due date of each task and task dependencies. It can assign owners to each task (including replacement employees in case of illness or other). Additionally, owners can add support files to close activities, leave comments on the status of tasks and utilize a real-time dashboard to enhance visibility and controls when managing the close tasks.
- Account reconciliations: Significant financial statement account reconciliations can be standardized and automated. Software allows the comparison of transactional details, bank statements or other supporting data and facilitates the investigation to explain variances.
- Journal Entries: Teams can set automation rules for data-based period-end journal entries. Further, journal entries can be created, reviewed and approved, then electronically certified and stored with all supporting documentation in the system.
- Variance Analysis: To ensure a timely and accurate management review, the software can automatically calculate and identify account balance and activity fluctuations. Variance rules can be established by the team, allowing analytics to be performed over various data and time periods, including current period to prior period, budget to actuals, current month to prior month, etc.
Bottom line, close management and automation software enables greater efficiencies and insights that can lead to clear ownership and accountability, enhanced controls and visibility, and stronger support to management decision-making.
Strengthen Governance Through Remote Controls Management
A shift to remote operations has resulted in changes in many areas of the financial close and reporting process, such as procedural changes to close activities, accounting policy changes and personnel changes, as well as potential changes to the review process.
When responding to such a significant shift, it is wise for organizations to review their current financial close and reporting processes to determine if and how they have changed. From there, teams can identify whether existing internal controls are functioning effectively to address new risks and requirements associated with closing remotely.
Organizations should focus on eradicating paper-based controls, automating or reducing manual controls and ensuring contingency controls exist to address unexpected changes in operations. As the control environment grows increasingly digital in the future, any controls redesign should leverage finance technologies wherever possible.
Going forward, organizations should continuously monitor, test and assess internal control design and operating effectiveness periodically to prevent and detect any material errors in the financial close and reporting process.
Enhance Teaming and Communication
Arguably, the most significant change to the current work environment is the way teams are functioning and communicating. Given this, finance teams will need to be more effective and attentive to the ways they collaborate and communicate before, during and after the close.
Pre-close, teams should hold regular meetings so they can confirm task owners, deadlines and responsibilities, as well as execute on any tasks that will ease the reporting process. During close, the frequency and focus of meetings should increase. Remember, the goal is to be proactive about communication and issue resolution.
Once the close is complete, the team should gather to discuss any delays and identify opportunities for improvement in next month’s close.
Enhanced communication isn’t limited to just the finance function, however. It should occur across the full enterprise so that finance is armed with accurate information for financial reporting. The same goes for cross-functional teams when it comes to timing requirements, timely issue communication and resolution. Collaboration applications and document management and sharing applications (e.g., Microsoft Teams, SharePoint) can provide methods to communicate, set meetings, share files, etc.
Turning the Page
As finance teams reflect on the challenges of 2020, they should consider that we have reached a new chapter in financial close and reporting. How teams meet today’s challenges will likely set the precedent and enable their future success. We’re in a trying and pressure-filled time, but from this moment will emerge greater efficiencies, insight and collaboration that will serve us for years to come.
© Copyright 2021. The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
About The Journal
The FTI Journal publication offers deep and engaging insights to contextualize the issues that matter, and explores topics that will impact the risks your business faces and its reputation.
Date
février 01, 2021
Contacts
Senior Managing Director