How to solve the financial close dilemma: 3 strategies that never fail

The great surge in entrepreneurship following the pandemic resulted in a significant disruption of most industries, which was mainly reflected in significant and widespread adoption of tech, both old and contemporary. Today, technologies such as artificial intelligence (AI) and machine learning (ML) are being applied across multiple departments and are helping teams work in synergy at a faster pace.

Finance teams are no exception to this trend. The month-end closing process benefits greatly from automation, reducing manual errors, streamlining internal controls, executing recurring events and tasks, and providing real-time insights into the process for quicker decision-making.

However, adopting new platforms and technologies to speed up processes can be overwhelming and time-consuming, especially when you don’t know where to start. So, I’ve put together three main strategies to put you on the path to fully digitizing your business and noticeably improve the closing process.

Automate low-value tasks

There’s an increasing need to remove laborious and recurring tasks from your team’s plate so they can focus on what’s important. But when it comes to the financial closing process, what can and should be automated?

These are a few recurring tasks that, when automated, can help your team check their status or progress at a glance:

• The preparation and review of balance sheet reconciliations.
• Completion and management of closing checklists.
• Balance sheet flux and/or P&L variance analysis.
• Data analytics on the health and status of the month-end close.

The data gathered in these steps will allow you to identify your business’ root issues quickly, which will then let you assess what to do next.

Not only will the adoption of automation tools further optimize the closing process, but as technologies continue to evolve, teams that layer these together will substantially improve speed and accuracy. These investments result in financial and operational growth, offering greater analytics and aiding the decision-making process.

Streamline internal controls

Accounting teams know that as the end of the month approaches, they’re up against tight deadlines. This usually means they’re torn between closing quickly at the expense of neglecting internal controls documentation or properly executing all compliance steps and prolonging their cycle.

Teams automating part of their internal controls don’t have to choose between speed and compliance — this is what AI and new tech solutions can do for you.

Modernizing internal controls is a crucial compliance task that can help your team generate financial reports faster without compromising accuracy. It comprises replacing manual controls with automated processes to let your team reassess their internal controls and identify potential risks to the closing process quicker.

Automating internal controls can help identify the following:

• Gaps, or areas with clear or stated objectives but no internal control or an inadequate one: This will let your team implement new internal controls or improve on older ones to mitigate risks.
• Overlaps, or areas with multiple internal controls seeking to mitigate the same risk: Here, you can reduce duplicate coverage to save your team time at the end of the month and help focus on other key areas instead.
• Areas where internal controls can be updated or automated: This can be done by replacing manual processes or replacing defective controls with preventive controls.
• Areas where you can implement anti-fraud controls: Doing this will let you noticeably reduce risks at the end of the month process.

Adopt and analyze sub-metrics

Automating processes usually reduces any manual errors, and the data collected through these processes can quickly become an asset for any team.

To fully take advantage of this newfound data, however, teams must adopt and analyze key sub-metrics to get a better idea of their financial and business health. This way, they can address specific bottlenecks and issues around the process. The key to operational excellence is knowing which data is pertinent for the financial closing process and why.

Here are some sub-metrics to complement the days-to-close calculation:

• The number of days for sub-ledger close: This can sometimes require reengineering processes, since sub-ledgers may require many days to close due to other dependent tasks.
• The number of tasks at month-end close: Myriad tasks, if not tracked, can slow down the process, so it’s imperative to use a tool and organized methods to complete and track critical tasks.
• Number of manual journal entries: This is a clear indicator of where potential automation can be applied. Measure your manual entries and automated entries and analyze the ratio to seek efficiency improvements.
• Number of error-correcting journal entries: These often represent duplicative work, as it requires extra effort and time to remediate errors. Use these as references to improve your processes and potentially eliminate these errors.
• Time required to complete reconciliations: Reconciliation is a time-consuming task, so measuring the time required to complete and meet reconciliation deadlines can allow you and your team to assess if automation is required without compromising quality.

When navigating the uncharted waters of increased digitization, companies that lag their competition when it comes to adopting new technologies will fall behind. Additionally, team leaders who fail to identify the benefits and different applications of automation within their departments will perpetuate error-prone manual processes.

For accounting and financial reporting, teaming up with tech can noticeably improve processes at the month’s end. By automating low-value tasks, streamlining internal controls and analyzing sub-metrics, you can solve your financial close dilemma and gain a competitive edge.