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Digital Transformation for CFOs

Digitizing your Financial Close Process

March 28, 2019
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Citrin Cooperman’s holistic view of the financial close process starts with the recording of transactions to sub-ledgers and continues through all the activities required to ultimately produce and review your financial statements. This is one of the most important and critical processes for a company. The complex relationship between finance systems, processes, and people can slow down a company’s growth and operations and limit opportunities to improve customers’ experiences. Improving the close processes, using systems that include the latest finance technology advancements, and employing a finance team with enhanced skills, can reduce cost, improve productivity, and drive accuracy in understanding financial information. Ultimately, you can operate more effectively as a team.

Here are a few of the ways we have had success driving efficiency and accuracy into the close process for our clients’.

  1. Streamlining and automating AP processing
  2. Organizing the close process
  3. Producing faster and more accurate monthly financials 

Streamlining and automating accounts payable processing

Organizations continue to struggle with the number of invoices being produced and procurement activities they need to perform to stay in business. Some of the challenges include manual matching and the cumbersome process of tracking open invoices, often resulting in delays in the close process. High-performing finance functions have started using purchase orders and maintaining accrual schedules in order to close the accounts payable sub-ledger earlier and make more accurate accruals. Using an Optical Character Recognition (OCR) solution can help the finance team automatically match the invoice and receipt so accounts payable clerks can focus on booking accurate accruals. This process allows companies to close their accounts payable sub-ledger within the first few business days of the month and move on to other closing activities.

Organizing your close process

One area that can often be immediately improved is the close checklist, which should clearly lay out the entire close process - from when sub-ledgers should close, to when the trial balance is prepared for review. In addition to the foundation blocking and tackling of a great month-end close checklist, we are beginning to see middle-market companies benefit from close-management solutions, which bring additional visibility, segregation of duties, and email alerts to keep the accounting team organized as they close the books for a company. In addition to organizing and tracking the entire close process and retaining the assets of each close process, many of these solutions have automations to reduce the length of the process and reduce the staff hours required. One example is the ability to perform balance sheet account reconciliations by automatically reconciling your sub-ledgers to your general ledger, which in turn allows your staff to focus on variances. The reconciliations themselves are key internal controls that SOX-compliant businesses are required to document every month, and these products can reduce the overhead associated with maintaining them.

Producing faster and more accurate monthly financials 

The necessary result of any financial close process is the ability to generate accurate financial statements on a regular basis - balance sheet, profit and loss, and cash flow statements. Most companies aim to produce financial statements less than 10 business days after the general ledger is closed. This allows the CFO to understand how the business is doing and what adjustments can be made to different projects or initiatives. This could range from allocating more cash to activities in operations or investments, to improving your inventory management, or accelerating accounts receivable payments. However, we are seeing that many middle-market companies are taking more than three weeks to produce financial statements, not leaving enough time for management to make informed decisions.

Accelerating existing processes has never been more important for finance and accounting teams. Businesses need to manage decisions within shorter timeframes – what used to be months or quarters is now days or weeks. The faster and more accurately you can generate the financial statements, the faster the management team can understand where the business is exceling, identify needed improvements, and address them with urgency and precision.

Citrin Cooperman’s Finance Transformation Practice helps bring the latest digital technologies and sophisticated finance processes to that help your finance organization achieve business success. Contact us to find out more about how we can help on your finance transformation journey. In addition, please see the following additional reading resources to understand our services:

Please visit our Strategy & Business Transformation Practice website by clicking this link