How to avoid painful pitfalls in financial closure

Unlock the path to a streamlined financial closing by overcoming common challenges and embracing key operational enhancements.

In brief

• Financial closing inefficiencies can cause errors and compliance failures.
• Investing in tech, standardizing procedures and promoting communication can streamline the process.

American author and philosopher Robert Collier said it best: “Success is the sum of small efforts, repeated day in and day out.” While, as business leaders, we instinctively know the details, of course, matter, it can be easy to become distracted by the big-picture goals of the future and the constant pressures of the bottom line. According to the U.S. Bureau of Economic Analysis, large US corporations typically reinvest 30% to 40% of their annual revenue back into their businesses to drive growth and expansion. But few actually prioritize the discipline, resources and time to continually refine and streamline those critical operations, particularly when it comes to the complex matters of financial closure. From project completion reconciliation to accounting period-end reporting, asset disposals and a wide variety of M&A activities, financial closing processes are complex, directly related to the operations of a business and present a minefield of potential opportunities for inefficiency, human error — and improvement. If you’re a controller or financial team lead managing these processes day in and day out and don’t have a system in place for streamlining or know where to begin, this story is for you.

Common challenges of uncoordinated financial systems

If operations aren’t systemized, there’s only one result: inefficiency. While it may seem that small, isolated issues with processes may make little impact on efficiency and profitability, the reverse is true. Without an organized approach across organizations, teams may use different methods and systems that ultimately can lead to redundancies, duplicated efforts and an increased margin of error that unnecessarily drains time and resources. Employees working within these kinds of environments often face task saturation, rising workload pressure and increased stress, affecting morale and productivity.

Accuracy can be similarly compromised without a streamlined and coordinated methodology. When departments function as silos with less-than-ideal interaction and communication, the chance for factual discrepancies arises — a fatal problem for financial close processes that rely on trustworthy data and accurate reporting. More critically, inaccuracies during close can lead to skewed financial reports that may misdirect management’s strategic decision-making. Left unchecked, in time, a lack of accuracy can also result in compliance failure, fines and reputational damage. As regulatory mandates continue to evolve and become more stringent, maintaining accuracy isn’t just ideal — it’s a business imperative.

Without streamlined financial operations and strong foundations, organizations lose critical agility. Rapidly changing markets, shifts in consumer behavior or unexpected competitive threats all necessitate swift, informed decision-making — something that simply isn’t possible without readily available, accurate financial data. Delays in consolidation and reporting, could mean missing out on key strategic opportunities that hurt the immediate bottom line but also limit longer term growth.

Six steps to begin streamlining financial closure

While strategies to streamline and optimize these operations largely depend on a company’s specific structure and needs, there are six core principles that any finance team should examine to streamline the financial close process and realize greater efficiencies:

• Technology investment: Invest in technology solutions that provide both visibility over your operational transactions and the ability to automate routine tasks and functions to create more standardized and optimized accounting systems. Automation of repetitive tasks such as data entry, reconciliation and the generation of reports can make a quick impact and free employee time for more value-add functions.

• Standardized procedures: Establish standardized procedures for efficient workflows relating to financial closure across departments and business units. This can create consistency and efficiency in things like documenting policies, checklists and agreed timelines for each step of the close process.

• Cross-departmental collaboration: Create better communication processes between financial, accounting, operations and IT functions to further streamline processes, building a culture of understanding and transparency to reduce inefficiencies and process bottlenecks between teams.

• Staff development: As you implement new tech solutions, ensure all team members involved with financial close are provided orientation and skills training in new technologies as well as ongoing skills updates on accounting principles and best practices.

• Continuous improvement: Solicit feedback and input from all team members involved with the financial close process to adjust and improve procedures. Change takes time and should evole over time; this does not have to be a big bang but a culture mindset to continue to look to improve.

• Outsourcing: Consider whether outsourcing some components of the financial close process makes sense. Some organizations outsource data analysis and reconciliation to focus internal staff time more efficiently. Looking to standardize, automate and reduce the manual efforts prior to outsourcing them will make your organization more efficient and agile with growth.

Each of these operational assessments and process enhancements to the crucial function of financial closes is important in its own right. Together, they will accelerate any organization toward fast efficiencies, assured compliance, improved morale and a better position for long-term success.