Imagine, if you will, a tale of two companies: both in the same industry and location, employing roughly the same number of workers, and with similar numbers for profit and revenue. One of them takes 10 days to finish its quarterly close-to-disclose process, while the other takes as many as 25. Which one would you say is in better operating condition?
Every company faces different challenges during financial close, and so delays might be due to any number of reasons: time-consuming, inaccurate manual processes; insufficient or inexperienced personnel; overreliance on Excel spreadsheets; or lack of interdepartmental communication.
Problems with sluggishness and inefficiency during the close process aren’t simply isolated issues; they are also indicative of larger concerns about the health and of your business. When it comes to the best and worst performers for financial close, it has never been truer that “time is money.” According to the business research organization APQC, companies that complete financial close in less than 10 days spend half as much on the process as their slowest competitors do.
For example, if a company has issues with speed and accuracy due to overreliance on Excel spreadsheets, then there is likely a bigger problem lying beneath. Employees might use spreadsheets to manually reconcile duplicate data from two different sources, or to manually collect data from different locations. Becoming complacent with (or being apathetic towards) an inefficient, error-prone process has broader implications for the organization. With a modern, purpose-built performance management platform, slow and error-prone processes can be left in the past.
The Problems with Forecast and Close Delays
When workers use inefficient Excel spreadsheets, the costs go beyond the additional time investment and potential for errors. There is also an opportunity cost, in that they have less time available to spend in other areas. In an era of unprecedented financial complexity, failing to leverage a modern performance management platform to support your forecast and close processes is both inefficient and potentially hazardous.
The inevitable mistakes that occur in lengthy, complex, highly manual processes can wreak havoc on both your internal workflows and your external perception. You need only to look at Tesco’s 2014 plunge, in which the company lost $3.5 billion in market value due to a profit forecast error, to understand the importance of accurate and timely financial data.
By taking too long to close the books, or trading accuracy for slightly reduced cycle time, organizations not only risk costly mistakes, but miss out on opportunities. A financial forecast delivered in a timely manner represents actionable information – the organization has time to act on the forecasted results before they materialize. Forecasts that take too long to complete are of limited value for anything more than setting bonus targets.
How to Address Forecast and Close Issues
Whatever the underlying causes, how organizations choose to deal with these issues reveals much about their leadership and prospects for long-term success. Working to address these challenges will not just enable you to forecast and close the books more quickly; it will add value to the organization by freeing up time for more strategic tasks.
If workers do not have access to modern financial close software that gets results into executives’ hands sooner, the impacts will be felt beyond the close, to other reporting and decision-making processes. When management is informed, timely, about issues and trends across the business, positive effects will be realized beyond the close process itself. For this reason, consider discussing the benefits of financial close software with your company’s leadership team. Forward-thinking CFOs recognize the benefits of a strategic investment such as implementing the right supporting technologies for a healthy, expedient close.
Beyond that, there are four main ingredients to a healthy, speedy, successful forecast and close: automation, process standardization, resource alignment, and the right enabling technologies. Organizations that understand the importance of these factors, and the current state of each, are best prepared to meet the challenges of today’s demanding forecast and close cycles.
For details on how to implement and sustain these four main ingredients for shorter forecast and close cycles, download Datavail’s white paper, Shortening Forecast and Close Cycles by 50% So You Can See the Future Instead of the Past.
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