“A-B-C. Always be closing.” For salespeople, these words (from the play Glengarry Glen Ross) may be the key to success. But for a finance professional, they’re more likely to elicit memories of late nights and takeout food. If that’s the case for you, it may be time to take another look at your financial close process. The close process is the supply chain of finance. To be effective, it requires speed, efficiency, precision and imbedded quality management activities. And unless you get it under control, you’re destined to “always be closing.” When you’re always closing, there’s no time left over to help your company grow; to advance your career. Not to mention improve the quality of your job. Let’s look at the history of the problem. Then we’ll suggest a few ways for you to consider that may be able to help you get your life back.  The Manufacturing Analogy
Whether you know it or not, as a Finance executive, you’re in the “global manufacturing” business regardless of the products or services your company actually provides. You manage a business with high precision requirements, little tolerance for error, and components (journal entries) likely coming in from multiple points, possibly even from around the globe. Every month, you’ve got to pull together the pieces and create a product (financial statements) critical to your company’s survival. One scenario many companies face in managing their financial information supply chain is an acquisition — especially a cross-border acquisition. Company combinations often involve a mish-mash of disparate systems, processes and reporting methods. After the deal closes, getting the “newco’s” financial close to work smoothly becomes your challenge. A related challenge is decentralization. Many companies have given business units more freedom. While that can be a great incentive to encourage entrepreneurial thinking and create a more nimble organization, it can be a real problem for the finance department. With each unit running its own closing processes – sometimes in different countries – weaving it together at the end of the month can be a challenge. Finally, there’s the challenge resulting from underinvestment in finance discussed in previous issues in this series. The companies with long and inefficient reporting cycles are the same ones that haven’t committed the resources to get their technology up to speed and organization properly aligned and trained. When you’re on an accelerating treadmill – think of all of your new compliance responsibilities in the last few years – you need more resources just to stay in one place and more effective resources to move the ball forward. An Approach to Consideration The good news is that to improve your closing process we don’t believe you always need to make huge, sweeping changes. But you’re likely to need to make a lot of small changes. This means taking a “roll-up-your-sleeves” approach, and digging deep into the mechanics of your closing and reporting process to see where the kinks and pitfalls may be lurking. An effective way to start is to break the end-to-end process down into its pieces, and then analyze each in detail to identify incremental improvements and changes that can be made. Here are a few hints: - Beware of spending your time looking for the big-bang or silver bullet changes everyone thinks exist. Instead, challenge every individual activity, actively probing for even the smallest improvement. Look for changes that will save hours – or even minutes. They add up.
- Establish and communicate a closing calendar – and measure yourself against it. Without it, you will likely suffer the same scrutiny and headaches quarter after quarter. It may seem amazing, but many companies don’t have a clear and reasonable close calendar – or hold people accountable for meeting it.
- See technology as a tool, not a constraint. Use technology to enable process efficiencies and to eliminate disparate systems, manual processing and spreadsheets. Don’t let existing technology limit your new processes.
- Finally, make sure everyone’s role in the process is clear. That improves accountability and connectivity. Get everyone on the same page.
Make Sure You Explore Upstream The close and reporting process starts way upstream in the business units. Without reliable data (the equivalent of raw materials from our earlier manufacturing analogy) from the operational systems that initiate financial transactions, the finance function simply can’t do its job effectively or efficiently. Many efforts to accelerate the close and reporting process fall short because they don’t look beyond the finance function. That’s why it’s so important to look deep into the organization and examine the data preparation and transfer processes within each business unit. In theory, closing the corporate ledger should be easy once the business units have relayed their accumulated financial data. But for many companies that’s more the exception than the rule. Last minute journal entries, convoluted accrual processes, and complex allocations all introduce errors and require time-consuming analyses. Standardizing and automating upstream data collection can help flatten these “speed bumps”. Exploring the territory upstream can have collateral benefits as well. Working closely with the operating units that generate revenue can give your staff the chance to engage in, learn about and add value to the day-to-day operations whose costs they're supposed to help manage. (See Silo Busting for Fun and Profit.) Eyes On The Prize Improving your financial close and reporting process can create and preserve value for your company, while reducing the strain on you and your team. Your investors won’t have any reason to complain about the tardiness or poor quality of reports. And your C-suite comrades will be able to make better-informed decisions with more clarity and confidence. Best of all, “ABC” won’t mean “always be closing.” Instead, think of the Jackson Five: “Easy as ABC. 123. Do re mi.” And say goodbye to the dread and drudgery of an extended, inefficient closing process. This publication contains general information only and Deloitte Consulting LLP is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Consulting LLP, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication. Written in association with the Economist Intelligence Unit (EIU)
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