The financial year-end is often a time of great stress for accounting teams, but it's not just annual reports that can cause problems. Monthly and quarterly reporting requirements can also be a challenge, particularly when trying to meet quick closing deadlines.
This can be an especially daunting issue for large holdings with sophisticated company structure and multiple subsidiaries, which might have different reporting practices, formats and schedules. Therefore, efficient data consolidation and transparent reporting gains immense importance and can really make the difference.
In this article, we will explore the common challenges faced by accounting teams when dealing with quick closing deadlines, and offer solutions to help meet these deadlines efficiently.
Why are short closings crucial for decision-making?
The financial close process involves gathering, reviewing, and reconciling financial accounting information, ensuring accurate records are maintained throughout the year. While the end of the fiscal year is the most critical closing period, many businesses perform more frequent book closures to review transactions, journals, and reports regularly.
Most business decision makers understand the importance of timely and accurate data for making informed decisions. The shorter the reporting deadline, the more likely the data is to reflect the current situation, leading to more accurate decisions. It is also crucial to validate records between different types of reports, such as accounting, management, and IFRS, to ensure the accuracy of the data they are using.
When the reporting deadline is too long, for instance, 20 days, decision makers may be relying on outdated data. This can lead to wasteful spending, such as investing in unnecessary warehouse activities, unprofitable clients or commercially unfeasible product lines. Post-mortem accounting can also occur, where issues only become apparent after they have already occurred, resulting in financial losses. Therefore, it is important to find ways to meet quick closing deadlines to ensure that decision makers have access to the most up-to-date and accurate data.
What challenges do accountants face?
Challenges in closing reporting periods can cause delays in meeting deadlines. The following are some of the common reasons why reporting deadlines are missed:
Involvement of multiple participants who send data too late;
Lack of automation, resulting in manual summarization, cross-checking, and merging of new data;
Insufficient standardization and process unification, leading to confusion and lack of control over the reporting process;
Variation in reporting formats and structures, making it difficult to reconcile data from different departments;
Use of different communication channels, such as email or messenger, causing data to be scattered and difficult to track.
These problems can significantly delay the process of data preparation, especially for planned reports. The size of the company and its structure can exacerbate these issues, with larger companies and holding units often having to consolidate disparate data from multiple subdivisions and branches.
This can result in exponential growth in communication channels and participants, causing delays and clogging of communication channels. To optimize the process, it is essential to streamline the number of communicators and their communication channels.
How can process automation help tackle these issues?
Process automation tools have become increasingly popular in recent years since they help organizations to run their operations more efficiently. For example, Enterprise Performance Management (EPM) and Corporate Performance Management (CPM) systems are a type of software that allows businesses to track and manage their performance based on real-time data. These systems provide a framework for measuring performance across all areas of the organization, including finance, sales, operations, and human resources.
Here are some tasks that EPM/CPM automation systems can solve:
Formalizing data collection and reporting processes, introducing uniform rules;
Providing unified forms and single channel for communication;
Enhancing quick access and reliability: all records are stored in a single database, which allows for version control, backups and simultaneous access by multiple users;
Speeding up data processing: complex calculations can be performed much faster or even automatically;
Consolidating financial data from multiple sources and providing a single source of truth for financial reporting.
The implementation of a CPM system such as 1C:Perform enables the establishment of consistent procedures and guidelines for data recording and management. For instance, when dealing with expenses that extend beyond the current month or when accounting for purchases without having received closing documents, specific accounting rules can be automatically applied to ensure accurate financial reporting.
Through automation and standardization, CPM systems allow for the formalization of processes and reporting steps, as well as the use of uniform forms and data formats for submission. Data is consolidated into a single, structured database with clear rules for handling and management, making it easier to generate various reports such as accounting, management, and IFRS reports.
What benefits can EPM/CPM systems offer?
By implementing CPM/EPM systems, companies can achieve significant benefits in terms of closing time reduction. For instance, a company can reduce its monthly closing time from 20 days to just 5 days with the help of automation. This represents a four-fold improvement in the efficiency of the closing process, which can lead to considerable time and cost savings.
Moreover, the benefits of CPM/EPM systems are even greater for large companies with complex structures, holdings, and multiple subdivisions. Such companies generate a vast amount of data that requires consolidation, standardization, and analysis. CPM/EPM systems provide a comprehensive solution for these companies by integrating data from various sources into a single database and providing standardized reports based on this data.
In addition, CPM/EPM systems allow for better collaboration and communication between different departments and teams. They help eliminate communication barriers by providing a single platform for data sharing and reporting, which ensures that all stakeholders have access to accurate and up-to-date information. This can help improve decision-making processes and enable companies to respond quickly to changing market conditions.
Overall, CPM/EPM systems have become essential tools for modern businesses looking to streamline their financial operations, optimize their performance, and gain a competitive edge in today's fast-paced market.
Meeting quick closing deadlines in accounting can be a demanding task, but with the right tools and strategies in place, it is possible to streamline the process and ensure accurate and timely financial reporting. Specifically, implementing CPM/EPM software like 1C:Perform can be beneficial in terms of process automation and unification, resulting in faster and more reliable data collection, processing and reporting. Especially for large holdings with complex structures, CPM tools are indispensable when it comes to consolidating data from multiple sources and merging into a single database.