When a company is trying to get to a faster close, there are many things left unsaid by the CFO. There are certain expectations of the members of the finance department to get things done faster, yet sometimes pointing out the seemingly obvious makes us realize the many holes in our own close process and how we can drive to that faster close ourselves. Let’s explore them together.
#5 – Let’s hold off on that acquisition, because it’s too hard to update all these Excel files.
Many, many Excel files, spread throughout the organization, some linked, some not, and now you need to add a new company to the organization…the house of cards comes tumbling down. Links break, formulas show ”#REF”, not to mention the potential for errors when users start adding and deleting rows from the spreadsheets. Excel can be a great tool when it comes to working with data easily and efficiently. However, what if you have hundreds of thousands of rows that need analysis? What if you want to roll that data up into groupings? What happens when it’s not just a single field of data, but multiple slices and dices of various fields? All of these things lead to a very manual process of consolidation and it’s hard to verify and trust the output.
The dynamic capabilities of a universal consolidation tool allow for master data automation, so as new company codes are added, it flows into the system, as well as dynamic reporting that allows users to pull ever changing organization structures into their Excel reports. It gives you the ability to handle multi-dimensional data easily for analysis. It also gives users the ability to create hierarchies on top of the master data, which allows you to drill down from the top of your organization, all the way to a single entity. Dynamic analysis, without the need to recompile and create yet another static Excel file. All of a sudden, that acquisition just got a little bit easier!
#4 – I only need One Cash Flow and it better be compiled manually.
Usually, as companies work through the close cycle, the cash flow is one of the last financial statements to be generated and can sometimes be a manual and tedious effort to compile all the necessary data. Not to mention the work required if it’s not just one cash flow that’s required, but many. Perhaps individual cash flows by company or groups of legal entities, plus the consolidated version? Maybe it’s not just a GAAP cash flow that needs to be generated, but a management format and even a different version that needs to be submitted to a corporate parent? The cash flow is a complex statement and all of these flavors take time to compile the data and verify the accuracy.
With a consolidation system in place, automation can be built to handle the generation of certain aspects of the cash flow. Standard rules and logic can be defined to take changes in certain balance sheet accounts and post them to the cash flow lines. Input templates can also be built to capture any manual adjustments needed. All of this occurring at the lowest level defined in the system, so it can be reported by single entity, groups of entities or consolidated. Then as data changes, the cash flow logic can be re-run to generate an updated version without having to recompile all the data, saving time and effort.
If you want to learn how you can automate your cash flow for a faster close cycle, view our on-demand video for tips and tricks.
#3 – Who knows where the affiliates are in the consolidation process, but I’m sure they will get it done eventually.
Some of the standard, delivered capabilities of certain consolidation tools include things like Work Status and Business Process Flows (BPF). Work Status can be used in the consolidation process to lock data when users have submitted their final version of data to corporate to prevent further changes. This can be used separately or in conjunction with BPF’s, which help guide the users through the close process and also provide central reporting to determine where each business unit is in the process. This helps to identify those affiliates that may be behind in the process and reach out to them to offer assistance or answer questions, while at the same time looking for affiliates that may already be complete to aid in building a faster close process. No more having to guess if somebody is complete or dealing with last minute changes since it was last approved. Read how CF Industries automated their processes to give their employees the flexibility to locate and sort thru their data easily for a faster close.
#2 – Intercompany Reconciliation is a breeze here, all the affiliates enter their transactions perfectly the first time, every time.
In a close process, as data starts to come in from various entities, or as data is compiled, that is when errors in the source data start to surface. Amounts could be entered incorrectly in the source system, or perhaps the amount is ok, but the trading partner is incorrect, both of which have downstream impacts to the consolidation. Usually this analysis is a time consuming and manual exercise to compile all the data for review.
One of the benefits of having a consolidation system is that you can define the Company/Trading Partner relationship within the model structure and load the data from the source system at that level of detail. Then when it comes time for analysis, a standard set of business rules and logic can identify the intercompany bookings between entities and store that data for further analysis using dynamic intercompany reports.
And the #1 thing never said by a CFO…
#1 – Auditing? What’s That?
One of the more concerning things for an organization, from a data integrity standpoint, is to have to try and trace backwards through various spreadsheets to find a change that was made that created errors downstream in the consolidation process. Sometimes the first and most time consuming step is pinpointing the error, but now what? How do you go about determining how it happened and preventing it in the future?
Within certain consolidation tools, there are built-in auditing capabilities to assist in this area. One of those is the ability to audit the transactional data within the system, to help determine what data point was changed, when it was last changed and by whom. The other piece tracks user activity to track when certain processes were run or things changed from an administrative standpoint. Did user security change and was it approved? Who changed a hierarchy of company codes that impacted certain reports? Both are effective tools to have handy when something was inadvertently changed in the system. It helps to save time tracking down the change but also to help identify the potential need for additional controls in the future to prevent it from happening again.
What’s Next for a Faster Close?
These are just a few of the various pain points identified throughout the numerous projects I have implemented over the years. If any of these sound familiar, please register for one of our upcoming webinars or download on-demand to learn how you can speed up your close process.