Benchmark Your Financial Close Process

A study of the R2R process and what you can do to make it a better experience for your team.

How does your company’s Financial Close process measure up in comparison to your peers? How does your process compare to other businesses in terms of speed, stress levels and satisfaction? What could you do to improve it?

We recently conducted a survey into experiences around the Financial Close process with over 100 finance professionals with roles such as CFO, R2R GPO, Manager of Finance/Accounting, Reporting Director/Manager, Process Manager, Controller, and more. The findings were intriguing.

What does the Financial Close process look like?

How long does it take? Our research showed that the majority can close the books in under a week, with 71% saying it takes 1-6 days. At the other end of the spectrum, 6% of respondents reported needing more than 11 days.

Is the process centralised? 57% of respondents said their process was managed from a shared service centre. Only 14% said the work was done in local offices.

And how are companies rating their processes for standardisation, visibility and automation? Across all three, less than 50% rated these aspects as ‘good’ or ‘excellent’. More dissatisfaction was shown with regard to visibility and automation, with each receiving a ‘poor’ rating of 22% and 26% respectively.

Our Customer Success & Product Management specialist, Suzi Cearns, suggested that visibility should be the first, and easiest, problem to fix. By using shared services with centralised control, staff from across an organisation will be able access the figures while the data is handled in a uniform way. Quick wins with process automation and standardisation can also be gained through new software replacing old systems.

The same can be true for the next points of concern, those relating to financial staff workload during the Financial Close process. Stress and workload levels jump during this period; 94% of those responding reported a high workload during the process, 87% worked overtime and 78% said they were under pressure to close faster. However, despite these factors, a good 75% said they reported within the close date deadline.

But does this hard work pay off? In terms of satisfaction with the job, respondents were not entirely positive. Only 55% said they trusted their numbers in the final report, with 46% happy with the quality of their process and just 39% satisfied with the visibility of the financial close.

It seems that staff in many financial departments are caught between doing their job quickly, or doing it well.

Suzi also recommends smoothing out the process by getting a head start and reconciling early where you can. This way, the workload is not concentrated into a short time period, thus reducing pressure on staff. If anything needs changing later, then you still have the control to adjust before the close date.

What aspects of the R2R process are causing problems?

There were many pain points for staff within the process but three in particular stand out, with more than 50% of respondents reporting each of them.

Manual, labour-intensive, spreadsheet processes were cited by 73% of respondents as a major problem; many staff are getting bogged-down by non-automated systems when dealing with data.

66% of respondents saw the lack of time for analysis of the figures and results of the Financial Close as a problem. This seems incredibly wasteful given the amount of additional work undertaken to complete it.

Finally, 54% said coordinating and obtaining information from other departments was a big problem, in fact this percentage was even higher in one of our recent live webinar polls, where this factor came top. Using systems that are not shared or centralised are clearly handicapping financial department’s efforts.

It is no surprise that dealing with these issues and others during a period of high pressure and extra work raises the staff’s stress levels.

On a scale of 1-10, 56% of respondents rated their personal stress levels during the financial close process as 7 or higher. This seems relatively high, until we asked their rating for their team’s stress levels, for which 80% rated it as 7 or higher. It appears that individuals may perceive their team as being more stressed as a whole than they are personally.

Where are people looking to improve their Financial Close process?

The priority with most respondents was to improve the overall quality of the close process and to close faster, while also reducing workload.

Financial departments can work to this target by benchmarking their current process and studying what went well, what went wrong and updating accordingly. Whatever went right, you can roll out across the system. Whatever went wrong, make sure it doesn’t recur. Adjust the system and then study again.

Shared and central systems are a great advantage as, by managing centrally, it is easy to roll out improvements. A financial department can drive quality by information sharing and comparing business units across the organisation. Prioritisation should be given to increasing visibility, as this will stimulate shared responsibility and mutual cooperation.

There was one very important aspect touched on earlier: the data screams out that the majority of finance staff (95%) don’t have time to do adequate analysis. If there is one area where the process needs to be improved, this is it.

How is this affecting the staff personally?

Professional outcomes can and do have personal impacts for staff, and affect the workplace perceptions of the financial department.

74% of respondents agreed that the efficiency of the financial close process impacted on how they were personally rated by senior colleagues within the organisation.

84% said they would like the process to take up less of their time, so they could think more strategically. More time to be able to analyse the figures would be important.

84% also said colleagues outside the finance department underestimate the pressure that the close process puts them under.

It would seem that colleagues outside of the finance department often have unrealistic expectations during the financial close. This was revealed when organisations used a dashboard to observe the workload, which instigated a change to be more agile. They facilitated more frequent reporting, reducing the stress levels and pressures on the finance department by not lumping all the work into a short time period.

A summary

The survey revealed these aspects of the Financial Close process to be particularly important:

• Speed – 78% of respondents are under pressure to close faster;
• Workload – people underestimate how the process entails high stress and long hours;
• Automation – the current systems are often spreadsheet-intensive, and must be improved;
• Analysis – not enough financial departments have time for it, when it could be crucial to the business;
• Quality – only 55% of respondents trusted the numbers.

What can you do to improve your Financial Close process?

From the findings, we developed three key takeaways to help you to make life easier:

1. Automate to improve visibility and trust

As mentioned, many financial departments currently face a battle between doing something quickly, or well. Automation can free up time, help them take control of their tasks and give them the means to improve quality. Little wonder that 90% of respondents are looking to automate their financial close process.

2. Consider the Cloud

Cloud tech has come a long way – it is more secure and resilient than ever. You are more likely to see a company server go down than any cloud-based system, and a closed system makes it more difficult to share up-to-date data. Your staff will be able to access and input documents wherever, whenever. Look at how many companies are making use of cloud technology today.

3. Future-proof your department by making time for analysis

With all this automation and data sharing in the Cloud, you may wonder if your job is safe. Actually, this is an opportunity to make your finance department indispensable, as it will free up time to analyse the figures and provide more feedback, input and value to your organisation. Analysis is a need-to-have, not just a nice-to-have, and it will secure your jobs.

In general, the report conveyed a consensus that there needs to be a shift from Excel, and similar systems that require intensive analysis and data entry, to more cloud-based and automated applications that facilitate information sharing, efficient processing and greater visibility.