The final days of every financial period can quickly become a stressful slog for finance teams. 

Accounting and finance professionals may spend days or weeks wrestling with the financial close process, a period marked by manual data entry, chasing down missing information, and a constant battle against errors.

This begs the question: why is the financial close process so broken in many organisations?

The answer lies in a combination of factors, but the good news is there are solutions readily available.

This guide explores the root causes of a broken financial close and how to transform it into a smooth and efficient operation.

What is the financial close process?

Financial close, also known as month-end or year-end close, is the process of finalising and reconciling all financial activities for a specific period of time.

This includes recording transactions, adjusting entries, and preparing financial statements.

The end goal is to accurately reflect the financial health of a company and provide insight into its performance.

However, despite being a critical aspect of a business’s operations, the financial close process often becomes a lengthy and tedious task that can cause major headaches for finance teams.

So why does this happen?

Let’s look at that next.

Why the Traditional Close Process Fails

Let’s start with why the financial close process is broken.

1. Lack of Standardisation and Defined Processes

Often, the financial close process operates on a foundation of “institutional memory” rather than documented procedures.

Different team members rely on their own understanding of “how things get done,” leading to inconsistencies and inefficiencies.

Additionally, a lack of standardisation across departments regarding data submission formats creates further roadblocks during consolidation.

2. Inaccessible Real-Time Data

Finance teams frequently struggle with a lack of real-time visibility into company spending and other financial data.

This can be particularly true for businesses with high volumes of expense reports. 

Without immediate access to accurate data, the close process becomes a time-consuming exercise in chasing down missing information and reconciling discrepancies.

3. Manual Data Entry and Errors

The financial close process is often plagued by tedious manual data entry tasks, especially for companies still following traditional approaches or using legacy systems.

These repetitive activities are prone to errors, extending the close cycle and creating headaches for finance teams.

Additionally, manual processes are inflexible and don’t scale well as a company grows.

4. Siloed Tools and Fragmented Information

Many businesses rely on a patchwork of disparate tools for expense management, invoice processing, and accounting.

This fragmented approach creates data silos, making it difficult to consolidate information and reconcile accounts during the close.

The Impact of a Broken Close Process

The consequences of a dysfunctional financial close process extend far beyond late nights and stressed-out finance professionals.

Here are some of the key negative impacts:

Reduced Accuracy and Increased Risk of Errors

Manual data entry and a lack of standardisation can lead to errors in financial statements, potentially impacting decision-making and regulatory compliance.

Delayed Financial Reporting

Extended close cycles can delay the release of financial reports, hindering transparency with stakeholders and impacting investor confidence.

Decreased Productivity and Morale

Finance teams bogged down in manual tasks have less time for strategic analysis and value-added activities. This can lead to low morale and hinder overall team effectiveness.

Limited Visibility and Control

Without real-time spending data, it’s difficult to identify trends, optimise spending patterns, and make informed financial decisions.

The Path to a Streamlined Close: Automation and Integrated Solutions

Fortunately, there are solutions available to transform the financial close process from a burdensome task into a streamlined operation.

Here’s how to achieve a faster, more efficient, and more accurate close:

1. Define and Standardise Your Close Process

Documenting a clear and detailed close process is essential. This should outline specific tasks, responsibilities, deadlines, and communication protocols. 

Standardising data formats across departments ensures seamless consolidation and reduces errors.

2. Embrace Automation

Technology can be your greatest ally in streamlining the close process.

Look for tools that automate tasks such as data entry, reconciliation, and journal entry creation.

Automated workflows can significantly reduce manual effort and minimise the risk of errors.

A great example is UniFi, a next-gen finance, accounting and business process automation platform that enables you to automate your entire close process, from data collection to reporting.

3. Implement a Real-Time Financial Reporting System

Having access to real-time financial data allows for more accurate and timely reporting.

Invest in a robust financial reporting system that integrates with your accounting software and provides up-to-date insights into your company’s performance.

This will not only improve the quality of your reporting but also save time during the close process as data is readily available.

4. Implement a Centralised Financial Management Platform

A centralised financial management platform offers a one-stop shop for managing all company finances.

This eliminates the need for multiple tools and creates a single source of truth for financial data.

Here’s how a centralised financial management platform can revolutionise your close process:

•  Real-time Visibility: financial management platforms provide real-time insights into company spending, allowing you to track expenses as they occur and identify potential issues early on. 
•  Standardised Processes: These platforms enforce consistent spending workflows across departments, eliminating the chaos of data submission in various formats.
•  Reduced Manual Efforts:  By automating expense reports, approvals, and data entry, financial management platforms free up valuable time for finance teams to focus on strategic analysis. 
•  Improved Data Accuracy:  Electronic expense reports and automated validations minimise the risk of errors associated with manual data entry.
•  Simplified Invoice Processing:  Centralised invoice management streamlines the approval and payment process, eliminating the need for manual data entry and reconciliation.

5. Integration with Accounting Software

Seamless integration between your core business system and accounting software allows for effortless data transfer and eliminates the need for manual exports. This ensures all financial data resides in a single

Conclusion

The financial close process no longer needs to be a dreaded period of stress and late nights.

By embracing automation, standardisation, and centralised financial management platforms, organisations can achieve a faster, more accurate, and efficient close cycle. 

This transformation not only benefits finance teams but empowers businesses with improved decision-making, enhanced financial reporting, and a strategic advantage in today’s competitive business environment.