Transport routes are pushed to capacity during the morning rush hour and as a result the commute is a challenge. Sometimes accidents disrupt your plans and lead to delays. When you arrive you may be far from relaxed, but you calm down before the next day when you will do it all again.
The financial period end is just the same! Finance staff regularly trying to complete similar work at the same time across different companies. There are usually problems and delays with mistakes being discovered occasionally. When the results are completed, managers will be checking the details via analysis and meetings. When completed, finance staff can relax a little, until next period end when they will do it all again.
Keep Calm and Carry on?
You’ll not be surprised that many companies control their period end processes using spreadsheets and leave the management of this to local finance teams. The spreadsheets are not part of corporate systems and there is little visibility of the detail of the processes.
During the closing process there may be a few errors or omissions. The errors are hopefully immaterial but the auditors occasionally find material errors and some that are not uncovered for many years.
In a few public cases, we have seen statements such as company XYZ ‘needed to restate its financial reports including prior years, citing material weakness in internal accounting controls.’
The cause of the issues are a lack of control over the financial processes, which is understandable where there are many companies, multiple systems and many manual processes that are not well understood.
The normal public announcement includes something like ‘an audit will ensure that the financial controls improve in the future’
Change for the better
You can improve the culture of control, compliance, auditability and transparency for the period end processes.
There are under-utilized solutions for planning, executing and monitoring the closing processes which address many of the challenges Financial Directors and finance teams face. SAP offers the SAP Financial Closing Cockpit. These systems ensure all the key tasks are planned and completed in the correct order with full visibility during the process, providing a corporate solution to controlling the period end processes.
Using a common tool across companies’ supports collaboration with automatic notification when tasks are completed to the relevant people and reduced manual processing via automation. This all adds to the time available for checking and reviewing the results instead of preparing them.
Rolling out the solution to all companies in the group provides increased visibility and reporting capabilities which provides concrete evidence to support further financial process change and continual improvement to process and controls.
It is true it is not possible to automate or change existing systems or processes overnight, however over time key areas can be improved to support an improved financial control environment is in place.
The project to implement planning, executing and monitoring of the closing processes is easier than you might imagine. Plan the tasks for one company to start with, focus on a few areas to automate and roll out.
You might not be able to control the morning rush hour, but you can significantly improve your controls of your financial period end close.
Working with international companies, Birchman have led multiple improvements programmes using SAP Financial Closing cockpit. To learn more click here.