How Financial Close Automation Can Solve Your Biggest Close Risks

Today, the demand on finance teams for reliable, accurate financial reporting is stronger than ever. Accountants are not only pressed for time to complete the close, but also face a shortage of resources to meet this demand. Because of this, accountants push themselves to complete the close and the resulting financial reporting, but many are not completely confident the numbers are correct.

In fact, 40% of finance leaders don’t trust that their financial reporting is accurate. This is because many organizations don’t have a sturdy control framework on which to base their financial processes. Here are a few things your financial close process may be lacking that increases the risk profile of your organization, and how financial close automation can help.

Lack of Close Checklist

Do your finance and accounting teams adhere to a close checklist?

Creating a close checklist for your accounting department is crucial because it not only increases efficiency but assures financial leadership that every task in the close was completed correctly. When accounting teams don’t have a close checklist to follow, tasks and procedures can slip through the cracks, affecting the accuracy of the financial reporting.

According to Citrin Cooperman, a global consulting agency, leading organizations’ finance teams utilize some kind of a close checklist. This helps them focus on completing the close accurately and timely while providing a template for leadership to check in with their teams to receive updates on the progress of the close.

Absence of Clear Governance Policies

Like a close checklist, another important aspect of a strong control framework is to properly develop and document close procedures and policies. This is especially important for an organization with many entities and instances of accounting teams because it ensures consistency across all accounting departments. This consistency is a key factor in reliable, accurate financial reporting. Additionally, without these internal checks, every accountant utilizes their own format and their own system of checks and balances. Not only does this promote process inconsistency—thereby increasing data inaccuracy—but it is time-consuming for another accountant or reviewer to decipher.

Equal Distribution of Attention

One of the major disadvantages that manual processes and spreadsheets perpetuate in the close process is the equal distribution of attention that is given to tasks. The high-risk tasks are grouped in with the low-risk tasks, and the same time and effort is given to both types. For example, in the transaction matching process, an accountant must manually sort through and match every transaction. Many, if not most, of these transactions already match and require no additional effort on the part of the accountant. However, for those that do not, there is very little time left over for the accountant to find and treat the source of the issue. Because of this, more exceptions will likely happen again the following period. With manual methods such as this, there is no time for process improvement.

No Time for Critical Process Analytics

Manual approaches demand every drop of the finance department’s time to complete. Usually, there is no time left over to run data analytics and evaluate specific close processes. Without this, investigating areas of weakness in your process is complicated and difficult. You have little way of knowing where the bottlenecks occur, how many versions of the same task exist, and the original source of many close issues. The ability to run these analytics on your close is invaluable to your organization and not only do you not have time to do it, but your complex spreadsheet system doesn’t allow for it.

Financial Automation Like Adra Can Solve These Problems

The Adra Suite of Solutions is an integrated, end-to-end financial close automation solution with special capabilities to solve these challenges. Develop a close checklist and the supporting governance policies in Adra Task Manager that are automatically enforced throughout the close. Allow automation to automatically reconcile accounts and match transactions that require no human intervention, and flag those that require a deeper look. Adra Analytics tracks all your close data period over period so you can dig into the details of your financial processes, like bottlenecks that hinder the progress of the close and how certain close periods compare to others.

Spreadsheets and manual processes cannot provide the control framework that your organization needs to create trustworthy financial reporting, but financial close automation like Adra can.

Learn more about the benefits financial automation can bring to your office of finance by seeing how Adra simplified Protector Insurance’s financial processes.

Written by: Ashton Mathai