The three legs to the stool: People, Process and Tools. This is borrowed from ITIL* (What is ITIL?) and is a set of detailed practices for IT service management (ITSM) that focuses on aligning activities with the needs of business, or in this case improving your month end close process. These practices can be applied to any activity by:
- Identifying the people involved in the activity, their skills and assigned responsibilities.
- Assessing the processes supporting the activity.
- Identifying the tools available to the people in supporting the activity.
Under ITIL, you should bring the people involved in the entire process together and discuss what processes they need to follow and what tools they will use. Here are 5 ways to apply ITIL best practices to improve your consolidation and reporting process:
- Meet with your team and build a calendar and checklists. Give them the goal if you have a specific target, for example, “Reduce the month end close to 5 days.” Clearly assign responsibilities and make sure to get their buy-in on improving the close. Assure them that nobody is at risk once the goal is achieved, i.e. you are not looking to eliminate staff due to gained efficiencies. The objective is to make the most of your resources and that by improving the close cycle times, the team will be viewed as a strategic partner to the business and not just “the number crunchers.”
- Break down the close into a clear sequence of tasks, identifying dependencies and any required sequences. Approaching process improvement this way will allow you to identify low-hanging fruit from simply reorganizing tasks. It allows your team to interact in revising and rearranging things on-the-fly and it helps the creative process. Guide your team in developing a clear picture of the process, because this will engage them to make the required changes.
It’s not just the financial numbers that show how well you perform as an organization — but also how well and how fast you can obtain those numbers and how the financial close impacts EPM processes.
- Look to areas where automation can streamline and improve accuracy. During this step, you are looking to enhance how you can leverage the finance solutions, such as Oracle FCCS, that are available to your team. Mundane data entry is rarely a necessity in today’s highly automated financial systems. The cost of manual data entry are simply too high given the capabilities of today's cloud-based finance solutions; manual entry simply is an impediment. Studies of manual payroll entry vs. using an automated process/service show that for each manual error it takes up to 4-times the time taken for the original payroll run to find and correct each manual error made.
Learn more about how you can harness the new power of budgeting and planning in the cloud >>
- The Soft Close: Look at doing weekly “soft closes” on accounts that have more cleanup involved. Does your sales subledger tend to have erroneous transactions that add hours or days to the close? Attend to them weekly. Look at the issues causing these errors and work with the people in charge of that activity to eliminate these errors. You will find such efforts add to your ability to offer more frequent reporting to certain audiences. By making the sales subledger more reliable on a daily basis, you can entertain offering FLASH Sales reporting – an extremely valuable enterprise performance By looking at problem accounts more frequently, you eliminate the number of errors in the close. Additionally, you instill a process of continual process improvement that may eliminate the need for the soft close.
- Consider the timing of certain accounts. Close accounts payable, accounts receivable and WIP balances on the last day of the month. Close them earlier if possible; often these accounts can be closed and reconciled before the last day of the month and then a very accurate accrual can be made to cover the gap in dates. When the new month is opened, the accrual is reversed and actuals are allowed to again flow through your systems. The uses of accruals alone for accounts where estimates are possible can greatly speed the close.
There are a few common themes here, namely communication, automation and instilling a culture of continuous reconciliation.
- Communication: Effective communication and continuous collaboration is critical within any group. Successful communication can help to foster a good working relationship between you and your staff, which will improve morale and finance efficiency. This applies to relationships between individuals and scales up through the entire enterprise. It can’t be said enough… communication is key to any success.
- Automated data entry systems ensure rapid processing of data volumes. The use of automated data validation and data correction programs of the automated data ensure detection of any automated errors. This leaves it to your team to review overall reasonableness of the data – a more “value added” activity for humans.
By 2020, over 50% of all enterprise data will be managed autonomously. And, 80% of application and infrastructure operations will be resolved autonomously.
- A culture of continuous collaboration offers many advantages to an organization. You always know where you stand, so to speak, i.e. surprises are fewer and errors are caught earlier when you have a continuous feedback loop. Feedback from reviews is timelier and therefore more actionable. Both people and processes are presented with constant opportunities for development. More regular feedback generally results in more forward focus, as opposed to always looking back at mistakes and errors.
In summary, when you improve your month end close process, it is really like any other activity you may encounter inside or outside of business. The effectiveness of any human activity relies upon the people involved, the processes they follow and the tools they have at their disposal. Their success in achieving efficiency and accuracy in results relies first and foremost on how they communicate. Poor communication will doom any effort regardless of the talent involved or the efficacy of its goals. Bad information (data) likewise can doom any task. And continuous improvement (review) is integral to any activity that benefits the group.
If you need help improving month end close processes, contact Strafford. We know finance. We know technology. We can help implement a new system, or upgrade your existing on-premises finance solutions. Our team of expert consultants, project managers and infrastructure gurus will bring your next project in on-time and on-budget.