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.
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.
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.