Does your close measure up?

When you fly, do you get to the airport with too much time to spare and fill it with unnecessary duty-free browsing—but board your flight relaxed? Or do you turn up at the last minute, rattled and anxious, boarding the plane with minutes to spare (or watching it take off without you)?

The reporting process for many companies parallels this kind of dilemma. Whether organizations race against the clock to close the books on time or spend longer on the process, those that treat it as a box-checking exercise won't deliver more than average-quality reporting.

And even if your finance function has invested in technology to cut cycle times, few teams have focused on monitoring and advancing the quality of the close process.

Without quality—the ability to close the books on time with zero risk and an excellent user experience for finance professionals—the goal of continuous or on-demand close will remain out of reach.

Finance functions still face barriers from legacy systems, disparate data, and an inefficient close process. And these challenges are only exacerbated by business complexity, economic volatility, stringent regulations, overworked employees, and no access to real-time data. With limited efficiency, speed, or transparency in the close process, CFOs can't deliver quality or value.

What do CFOs need? A continuous close process that allows F&A to report on the company's financial performance on demand and with confidence in the accuracy of the numbers. This means less time spent sifting through irrelevant, inaccurate data to crunch numbers that only report on past performance. CFOs want to spend more time uncovering predictive insights that help guide strategic decisions for the business.

As finance functions learn to operate in more dynamic, fast-paced businesses, the regulatory environment has put the quality of the financial close process in the spotlight—and with it, the reliability of your financial statements.

With advances in digital technologies and data analytics, continuous accounting is becoming a reality alongside enhanced user experiences and business partnering. But before you can reach these goals, you must maximize the quality of your close process.

Let's look at how organizations are tracking the quality and efficiency of their financial close for internal and external reporting.

Measuring performance

To improve the quality of your financial close process, start by tracking the number of incorrect postings or unreconciled open items you have, the level of general ledger close accuracy, and the top-20 adjustments. Some companies go a step further and map these metrics to parameters like the organization's strategy, policy, reporting, performance, and governance to identify the root causes of these issues.

By understanding how your finance sub-processes need to change, you can identify technology gaps, inconsistent data, training needs, and the financial impact of manual entries or adjustments on your function.

Scoring submissions

Once each business unit closes its books, the consolidated finance team scores the submission from 0 to 10 (with 10 being the best), based on parameters such as the level of rework, adjustments, submission rejections, and delays. The aim is to deliver first-time-right submissions and build a culture of continuous improvement.

Managing by exception

Instead of the submission score, some organizations track quality by looking at different exception types. Some of the rejections they measure include HFM load file errors, corporate tax adjustments, volume corrections, equity investment, intercompany corrections, and the improper use of reporting levels.

Keeping an eye on reliability

Organizations that are highly focused on the quality of their close have established ways to measure the accuracy and integrity of their processes. For example, a leading retail company has designed a framework that has 10 parameters to score against. They calculate a weighted average score that they benchmark and report on periodically.

Reliability measures include the length of close delays, number of entries posted after the cutoff period or last-minute/post-close adjustments, the quality of the stakeholder experience, and volume of journal-entry corrections.

Orchestrating a smooth close process using automation, analytics, and workflow is key to ensuring close quality. For instance, BlackLine Task Management enables accounting to manage closing tasks centrally and boost visibility. You can track a variety of activities including close checklists, tax filings, and audit documents.

Tomorrow's finance function will be data-centric, insight oriented, and value driven, and will be a strategic partner to the business. This vision drives every finance transformation story today.

For finance functions that still struggle with the integrity and reliability of their financial close, start by reimagining the financial consolidation and close process with the right approach.

For example, our financial statement reliability index evaluates components such as fixed and intangible assets, inventory, and revenue recognition on scales such as variation and quality. The scores—which range from optimal to unacceptable—provide a detailed view of the quality of every component on the financial statement.

Once you have these measures in place, you can boost the quality of your close process, which gives you a head start on your journey toward a continuous and on-demand financial close. A journey without any last-minute, frantic dashes or wasted time. Bon voyage!

This article was authored by Vivek Saxena, SVP and F&A service line leader, Genpact, and was first published in the BlackLine Magazine.