Speedy, efficient forecast and close cycles are essential to the health of your business. If you are repeatedly struggling to close the books, it is a clear sign that there is something wrong with your close-to-disclose processes.
Far too many organizations, unfortunately, are either content to remain struggling or feel they have no choice. Greater technological complexity, multiplying data sources, and heightened pressure from stakeholders can make the prospect of shortening your forecast and close cycles seem entirely out of reach. If you find yourself identifying with the five challenges below, it is time to investigate ways to improve your forecast and close processes.
1. Excel Addiction
Microsoft Excel is an excellent software application; however, like most applications, it has an intended use case. All too often, Excel is tasked to serve a purpose beyond its niche. When organizations begin using it for functions better served by an enterprise application, trouble often ensues.
Excel’s power and flexibility may actually undermine efforts to shorten forecast and close cycles because it is far too easy for users to modify standard templates. If someone decides to squeeze a few more rows into the spreadsheet that everyone uses, it can inadvertently throw off the process several steps down the line. Someone at corporate will inevitably work late hours to find out why results aren’t aggregating as expected, assuming the error is discovered at all.
2. Too Many Cooks
Many organizations believe that the delays and inefficiencies they face with financial close are primarily a problem of too few resources. However, it’s rarely the case that you can fix issues in your close-to-disclose processes simply by throwing more bodies at the problem.
Putting more people to work on financial close means that you have fewer people to work on your organization’s real obligations, which can slow you down even further. As a result, problems with close feed into problems with forecasting. Improving the efficiency of the overall close and forecast processes can meaningfully lower the FTEs required to execute these processes on a timely basis.
3. Outdated Data
Many organizations’ issues with forecasting can be traced back to that classic movie quote from Cool Hand Luke: “What we’ve got here is failure to communicate.” When different departments keep their data locked away from each other in silos, no one benefits.
As a result, forecasters don’t have access to the most up-to-date information, forcing them to rely on historical data and to make worse predictions of the future.
4. External Pressure
Financial close is not just something that you do for fun; it is a quarterly obligation for publicly traded companies that is mandated by the U.S. Securities and Exchange Commission. Failure to meet the imposed deadlines can result in suspension from stock exchanges, with a commensurate loss in confidence from the investing community. Meeting deadlines but having to restate earnings due to a mistake can be just as devastating.
With so much riding on financial close cycles, organizations may feel pressured to cut corners, which can create a snowball effect of errors and make the problem worse. The only tenable, long-term solution is to make adjustments so that more time can be spent on reviewing and validating results and much less time on compiling them.
5. The Wrong Technology
While technology is not the only lever available for improving cycle times, identifying with some of the four issues described above suggests that the wrong software platform (or the lack of one) could be contributing to your issues. Relying on manual processes during your forecast and close cycles is inefficient and error-prone, and Excel spreadsheets are barely an improvement.
Despite the obvious benefits of having the right supporting technology in place, many companies decide it is easier to stick with what they know. This institutional inertia results in organizations choosing to sacrifice the long-term advantages of a modern technological close solution for the supposed short-term convenience – even though making the switch would ultimately be much more convenient.
There are countless ways to trip yourself up when performing financial close and forecasting, but only a handful of ingredients to surmounting these obstacles; among them are: automation, standardization, and technology. Efficient, modern close and forecasting solutions such as Oracle’s cloud-based EPM offerings, have made it easier (and cheaper) than ever to put the right enabling technology in place.
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