6 Financial Close Challenges and How to Overcome Them

Executive Summary: Key Insights

Finance at a Crossroads: In a volatile economic environment, CFOs must deliver faster, insight-driven decisions, yet many Finance teams remain constrained by inefficient, habit-driven close and reporting processes.
Fragmentation and Complexity: Ageing, spreadsheet-heavy CPM environments and disconnected systems increase manual effort, reconciliation risk, and technical debt. This impacts agility as regulatory, ownership, and reporting requirements grow more complex.
Insight and Speed Gaps: Without a single source of truth and sufficient automation, Finance struggles to deliver the right information at the right time, limiting real-time visibility and delaying critical business decisions.
Reimagining the Close: Organizations that adopt modern, cloud-based platforms can automate the close, improve transparency and auditability, enable inter-period insights, and transition Finance from a production-line function to an Intelligent Finance model.

CFOs and Finance teams need to drive organizational decisions with speed, insight, and confidence, yet many are still weighed down by inefficiencies in the month-end closing process, making it difficult to focus on value-added analysis and strategic decision support. Understanding how to improve the month-end closing process is critical for achieving a faster close and unlocking more time for Finance teams to drive meaningful business impact.

Organizations that do successfully adopt modern, cloud-based solutions for financial close, consolidation and reporting have been more successful in streamlining back-office processes and driving financial performance. And perhaps most importantly, such organizations have gained the agility required to lead at speed and adapt quickly to changing business and industry requirements.

To improve your month-end closing process, your organization must tackle these six key challenges:

Aging, Fragmented & Incomplete CPM Systems
Increasingly More and More Complex Regulatory and Internal Requirements
Getting The Right Information at the Right Time
Too Many Manual Steps in Processes – Limited Automation
Limited Inter-Period Reporting Capabilities
Lack of Transparency, Auditability & Controls

The 6 Key Challenges for Financial Close & Reporting

Unfortunately, many close processes are simply run from memory and out of habit, often with no solid desire to improve or change the status quo. Some organizations don't realize there's a better way.

Today's post highlights the 6 key challenges many organisations face as they look to transform the financial close process.

Now is the time to identify and address each of the following 6 challenges to set your organisation on a path to real change and reimagine your financial close.

1. Ageing, Fragmented & Incomplete CPM Systems

Corporate performance management (CPM) processes supported by spreadsheets and a complex patchwork of other software can actually slow down Finance and may result in significant duplication and rework. How? Well, this fragmented approach to supporting close processes creates added technical complexity and administrative burden on the Finance team. That burden includes moving and reconciling data, constantly managing metadata in multiple systems, monitoring data and managing security between fragmented products or models (see Figure 1).

Figure 1: Connected Finance Solutions – Fragmented

All of these aspects dilute the ability of Finance teams to focus on driving performance and supporting critical decision-making. These problems are only further compounded when there is a lack of key functionality to deal effectively with complex requirements, such as consolidating and eliminating inter-company balances automatically, without rules, or effectively handling alternate hierarchies without data duplication.

2. Increasingly More and More Complex Regulatory and Internal Requirements

Complexity increases the moment an organization becomes international. This is largely because Finance teams must manage several interconnected challenges, including:

Complex ownership structures.
Multiple currencies.
Inter-company trading across geographies.
Different tax treatments.

These challenges are compounded by regulations that govern how organizations report their results and comply with relevant local and industry rules. Add to that the short filing timeframes given to organizations, and it becomes clear that robust and efficient systems and processes are the order of the day.

In the US, for example:

Section 409 of the Sarbanes-Oxley (SOX) Act requires that public companies report any material events that result in a change in the company's financial condition within four days of the event.
The deadline for the filing of the 10-Q (quarterly report) was recently shortened from 45 to 40 days after quarter end.

Such regulatory requirements are pushing the office of the CFO towards not only faster closing and reporting but also the injection of more regular insights into financial results.

3. The Right Information at the Right Time

Why is getting the 'right information at the right time' so difficult? It comes down to the effectiveness of the Finance processes. The biggest issue is not having a single version of the truth and continuing to run a fragmented close process that requires trying to keep everything glued together. That creates a less-than-ideal situation, and there's entirely too much time being wasted on integrating, reconciling and validating data (causing unnecessary delays to key decisions).An Accenture research report from December 2020 surveyed 450 CFOs and other Finance leaders at companies with at least $1B in annual revenue. A key finding especially stood out: while nearly all respondents believe operating with real-time data is critical to navigating disruptions, such as the recent pandemic or the threat of a recession, just 16% of respondents are being informed by such data at the scale that's needed.

Figure 2: Accenture 2020 – Time to Get Real

These challenges are not limited to financial consolidation and close processes. For many companies, financial processes are too manual and not yet automated or standardized, leading to time-consuming data entry (and re-entry) for reconciliations, reclassifications, and adjustments.

4. Too Many Manual Steps in Processes – Limited Automation

Are manual steps in Finance processes really that bad? It's true that some level of manual processes in small to mid-sized organizations may not be a huge problem. It really all comes down to manageability. As organizations grow or become more complex, manual processes add unnecessary risk, costs and time delays – all of which can accumulate over time and be very damaging.Manual steps can result in the following pitfalls:

Inconsistent Closing Calendar and Checklist: Creating different versions of the truth and a lack of common understanding of when actions are taking place.
Lack of Quality Validated Data from Underlying Sources or Ineffective Data Aggregation: Resulting in reporting errors and poor decision-making.
A High Level of Manual Journal Entries in the Close Process: Causing delays that can result in late filing.
Ineffective Procedures for Validating Results: Potentially sharing incorrect data in reports and with stakeholders.
Time-Consuming Intercompany Accounting and Reconciliations: Resulting in complexity that often cannot be reconciled in the time available.

All of these potential pitfalls only emphasise why automation is the way forward. And today, the most successful organizations are embracing automation by using financial close software to better equip their people and to ensure they have agile and effective processes.

5. Limited Inter-Period Reporting Capabilities

Most organizations focus considerable time and resources on monthly, quarterly and annual reporting requirements. So why do very few organizations use 'inter-period' (i.e., daily or weekly) reports? The reason is very often because, historically, Finance processes and technology did not allow for inter-period reporting. Finance teams had a lot of manual tasks just to complete the existing reporting cadences, which left little or no time to consider any additional regular data points or insights.

Figure 3: Key Operational Data Collected in Everyday Systems

Now organisations are discovering they have vast amounts of valuable information that's collected every day in ERP, CRM, HCM, Supply Chain and other systems — information that has not typically been leveraged to support daily and weekly operating decisions. The organisations that can harness these large volumes of operational and often transactional data to identify key trends and 'financial signals' can move to support daily and weekly decisions. Such decisions can positively impact month-end financial results and therefore the performance of the overall organisation.

6. Lack of Transparency, Auditability & Controls

Many legacy CPM and/or connected Finance applications provide file-based integration with source systems, but key advantages come with having full, direct integration between CPM and GL/ERP and other systems.

Why are those advantages so important? Well, a lack of robust data integration capabilities creates a multitude of problems, including:

Cumbersome manual steps
Wasted resources and time
Risk of errors
Poor financial data quality
Lack of traceability
Lack of auditability

Thus, the effectiveness of the financial close and reporting processes is fully dependent on getting timely and accurate data from GL/ERP, HCM, CRM and other systems.The loading, mapping and transforming of data from source systems to CPM solutions can be especially cumbersome and fragmented without highly connected and business-user-managed tools. Not to mention, data movement may be reliant on IT resources that are not knowledgeable about both the CPM model and the transformation and validations that must occur. This issue is even more problematic without the transparency and controls needed by the business to support compliance.

How to Overcome the Challenges – A Strategy for Moving Forward

Many legacy Finance teams operate in the form of a conveyor belt production line. Each person has specific tasks to complete during the close process to generate the required financial reporting.For organisations looking to move away from this production-line approach, now is the perfect time to reimagine the close and effectively address these challenges with the key steps below:

Define a close calendar to orchestrate and monitor the process on a day-by-day basis.
Eliminate risk by reducing manual movements of data and automating data feeds/validations.
Provide clear audit trails and visibility so that there is no question about accuracy and consistency.
Take advantage of built-in financial intelligence to handle complex financial consolidation (e.g., intercompany eliminations, foreign currency exchange [FX], accounting for partial ownerships).
Eliminate errors and drive standardization by automating reporting.
Consider further automation opportunities for back-office processes, such as account reconciliations.

At OneStream, we call this Intelligent Finance. Book a demo with us today to discover how you can modernize your financial close and consolidation.Or, to learn more about how organisations are reimagining the financial close, click here to access OneStream's Streamlining the Close whitepaper.