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News < Back Sarbanes Oxley : Finance : Sarbanes Oxley Streamlining the Close Addressing the Issues that Slow the Closing Process
In many cases, the improvements that organizations need to make to speed up their accounting close are also the kinds of improvements that save money. In our judgment, process design and systems issues are most often the points on which companies must focus to speed their closing. Simplification and using the right software/technology are a common theme. View In our recent research study we found 61% of the respondents from corporations with more than 1,000 employees or $100 million in annual revenues (the size of organization on which the study focused) wanted to accelerate their monthly close, and 54% wanted to speed up the quarterly close. Companies wanted to shorten their closing cycle in order to provide management with financial information sooner. With shorter reporting deadlines imposed by the SEC, faster closing also leaves that much more time to prepare the financial statements and the management discussion and analysis that accompanies it. Over the past decades, corporations have been able to use information technology to close their books faster. In the late 1990s, there even was talk of a achieving a ?virtual? or near instantaneous close, but companies appear to have made little progress over the past several years toward that goal. Our study confirmed most finance and accounting executives think shortening the close is a key objective (29% stated it was very important and 45% rated it important). Ventana Research advises companies to examine each element of the people-process-system to find opportunities to shave the time it takes to effect the close. In our judgment, having the right software becomes the most important factor in achieving an optimal closing period. Unnecessary complexity has been a consistent factor in making the closing process more time consuming than it needs to be. While we did not investigate it for this study, too much detail in allocations than can be handled by a company?s systems has been a major cause in driving lengthy closing times. Systems complexity is another: 25% of respondents reported they pulled information from five or more systems to perform their accounting close. Having the right consolidation software (or using existing consolidation software more effectively) can address many of these closing issues.. Companies should also investigate reducing the number of ERP instances and harmonizing the charts of accounts across the enterprise. While we doubt many Global 2000 companies would find it cost effective to maintain a single instance and one chart of accounts, we assert most would see a payoff if they were to reduce the number of accounting system vendors/instances or insist on greater commonality in their account structure. In addition, companies need to reduce their use of spreadsheets and manual entry, and increase process automation in the close. We found nearly half (49%) of respondents that described their company as a limited user of spreadsheets were able to perform their monthly close in 4 days or less, compared to only 27% that said they used spreadsheets extensively. Overall, we estimate companies that limit their spreadsheet use are able to close about 20% faster than extensive users. Spreadsheets are well suited for automating many tasks, but the close is not one of them. Moreover, using spreadsheets (and manual data entry) almost always introduces errors that take time to detect and correct. One third of the participants said they could save 1-2 days by eliminating errors while 22% said they would save 3 days or more. Having the right consolidation software (or using it more effectively) is another part of the solution. Participants were asked to what degree automating the process (e.g., consolidating the books, calculating allocations, creating journal entries, etc.) would affect the closing interval. Nearly two-thirds (63%) believed the impact would be ?significant? or ?very significant.? Only 7% noted their process was already automated. Assessment Ventana Research believes improving core financial process efficiency is essential to a more effective finance organization. Companies began to automate their closing process more than a decade ago. Today, all Global 2000 corporations use statutory consolidation software and other applications in one form or another. Investments in these systems have produced tangible results, but based on the research just completed we conclude there is still much more to do. We advise CFOs and controllers to find ways to shorten their closing cycle and to focus on their software and IT systems. When those tools are neglected, they often become barriers to change. Enhancing and optimizing the software environment frequently becomes an enabler of change. Ventana Research is the preeminent research and advisory services firm helping our clients maximize stakeholder value with Performance Management throughout their organizations. Putting research in a business and IT context we provide insight and education on the best practices, methodologies and technologies that enable our clients to leverage assets to understand, optimize, and align strategies and processes to meet their goals and objectives. 
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