Mastering the Financial Close

What's Holding Organizations Back?

With the introduction of more financial software offerings, we've seen the emergence of terms such as "connected financial close" and "connected reporting" to describe the integration of key finance processes. These terms emerged in response to increasingly more "modules" coming to market to handle tasks such as account reconciliations, tax provision, and financial reporting.

Unfortunately, however, the evolution in many organizations appears to have stopped after the first purchase of a corporate performance management (CPM) solution.

Finance Processes and Systems Are Often Fragmented

Stakeholder groups across the enterprise — Legal, Executives, Corporate FP&A, Ops Finance, LOB Leadership, and Sales Finance — each run their own point solutions for processes such as long-range planning, account reconciliations, tax provision, operational planning, management reporting, lease accounting, statutory reporting, cash forecasting, and profitability, feeding into financial consolidation and planning & budgeting. Connected this way, the resulting landscape is complex, high cost, hard to scale, and loaded with technical debt.

Connected finance solutions have propelled finance transformation for over 20 years. Yet these solutions aren't really designed to help the largest and most complex organizations drive performance in this new era. For large, global organizations with complex finance processes, connected finance solutions are difficult to scale to meet today's requirements — because every departmental and corporate application or model must be connected or integrated, adding risk, cost, and complexity to already-taxed finance teams. Here are some important factors to consider when looking at the current state of the close process within large, complex organizations:

To truly become a strategic business partner, the finance function must dramatically reduce its transactional workload. Unleashing the true value of finance requires efficient processes that minimize manual tasks — performing allocations, calculating depreciation, or posting manual journal entries — freeing the finance team to focus on value-added analysis and decision support. Automating and unifying the financial close and reporting process ensures faster delivery of financial, operational, and sustainability/ESG results to management, and to external stakeholders, for accelerated decision-making.

How to Master the Financial Close

A unified financial close solution provides more automation, removes the complexities of the past, and meets the diverse requirements of even the most complex organizations, today and well into the future. For organizations seeking to finally unleash their finance teams from disconnected tools and spreadsheets, a specific set of capabilities is required.

• Financial data quality
• Anomaly detection
• Account reconciliation & transaction matching
• Financial consolidation
• Financial signaling
• Tax provision
• Built-in reporting & analytics
• Narrative reporting
• ESG/sustainability reporting

Financial Data Quality

At its core, the fully integrated CPM platform must have good financial data quality management (FDQM) — critical for organizations to drive effective transformation across finance and lines of business. A key requirement is 100% visibility from reports to sources: all financial and operational data must be clearly visible and easily accessible, key financial processes should be automated, and a single interface should let the enterprise use its core financial and operational data with full integration to all ERPs and other systems. The solution must also include guided workflows that protect business users from complexity — guiding them uniquely through data management, verification, analysis, certification, and locking.

At every step in the workflow, users should be able to achieve effective FDQM and verification through standardized and simplified data collection and analysis with reports. Workflows must be guided to provide standard, defined, and repeatable processes for maximum confidence and reliability in a user-driven process — simplifying business processes and reducing errors and inefficiencies across the enterprise.

Anomaly Detection

Organizations can unlock the potential of their financial data with anomaly detection powered by machine learning (ML) — trading tedious manual analysis for a streamlined process that effortlessly uncovers hidden anomalies within transactional data. An intuitive anomaly detection system should be capable of sifting through general ledger (GL), accounts payable (AP), and accounts receivable (AR) data, and quickly and repeatedly present a clear snapshot of irregularities, backed by user-friendly dashboards and risk-rated analysis that give a comprehensive view of all questionable transactions.

Anomaly detection solutions harness the lightning-fast processing power of ML, coupled with industry expertise and the scalability of cloud computing, to serve as a pre-audit safeguard for financial figures, ensuring accuracy and integrity across any transaction volume. As businesses expand, so does the complexity of financial operations — but a powerful anomaly detection process lets teams scale confidently, knowing risks can be identified swiftly and errors eliminated before they hit the bottom line, giving finance and business leadership the peace of mind to focus on driving growth and success.

Account Reconciliation & Transaction Matching

The key to more effective account reconciliations is not only to automate the process but also to fully unify it with the financial close. If GL trial balances are loaded into a single system for financial consolidation, reporting, and account reconciliations, the data stays synchronized and the close is faster and more efficient. One single trial-balance load can, in parallel, feed all reporting processes — including account reconciliations — from the same source, reducing the risk of differences and speeding the close. An integrated, unified system should include automated transaction matching to help resolve differences and accelerate reconciliation by quickly matching transactional data from multiple sources.

Automation is key to that functionality because it:

• Allows matching to use a rule-based approach so users can focus on the exceptions and drive process efficiencies
• Avoids error-prone reconciliations in spreadsheets
• Reduces manual steps

When the process is fully automated and unified, the same trial balances feed both the close and compliance processes — data that changes constantly in the close gets reflected across processes automatically, without physically moving data between separate connected finance solutions. That eliminates the data integrity gap that happens frequently when using separate CPM tools. The unified approach flows as follows:

1. Import & transform GL trial balances from source systems — G/L subledgers, flat files/XLS, and outsourced or external data.
2. Calculate & consolidate on a single, synchronized trial balance.
3. Use Discovery to define the required reconciliations, then run monthly recon balance updates.
4. Prepare & approve reconciliations, then generate financial reports — with full financial integrity, since everything runs from the same source.

Financial Consolidation

The financial consolidation process drives the "book-of-record" reporting for the organization, making it an important process to conquer with confidence. Whether the organization is private or publicly held, reporting for external stakeholders must be accurate, timely, and compliant with US GAAP, IFRS, or other local regulations — for financial statement reporting as well as statutory reporting and regulatory filings.

Importantly, the consolidation tool is not simply an aggregation tool — it has built-in intelligent capabilities designed to support the requirements of the largest and most complex organizations around the globe, including:

• Statutory consolidation and reporting according to US GAAP, IFRS, Multi-GAAP, and local requirements
• Advanced foreign currency translation
• Powerful, automated inter-company eliminations
• Flexible organizational structures with varying ownership percentages
• Base and topside journal entries
• Powerful allocations
• Complete audit trails and drill-through capabilities
• In-system reporting, analysis, dashboards, and Excel® integration

Financial Signaling

Financial signaling brings the vision of daily close performance reporting to reality, empowering accounting and finance teams with daily or weekly insight into key metrics and drivers of the business. These signals can highlight critical opportunities or risks that require action.

Such signals allow finance to view potential misstatements in the GL prior to month end, immediately identify areas of the close process causing delays, or use flux analysis to highlight areas of concern in the financials. With weekly or daily insight into these trends, managers can take action to proactively influence period-end results. Effectively performing financial signaling requires three key capabilities:

1. Integrating large volumes of transactional data from a variety of sources.
2. Aligning that data with book-of-record financial data and the dimensional structures understood by business users.
3. Making the data available for analysis by controllers, executives, line-of-business managers, and analysts through interactive dashboards and other data visualization and analysis tools.

Tax Provision

Modern dynamics make it critical for organizations today to eliminate spreadsheets and disconnected point solutions, and to automate and streamline tax provision and reporting. Purpose-built tax provision software can materially decrease accounting close cycles while delivering increased accuracy and transparency; aligning tax provision with financial consolidation and reporting adds further benefit. By leveraging a single, unified platform with guided workflow and process controls, tax teams can mitigate the risks of using disparate data sources and spreadsheets — and drive a higher return on investment.

The benefits of automating and streamlining tax data collection and validation, while ensuring consistency in tax calculations, include:

• Leveraging the same trial-balance load for tax provisioning as for financial reporting
• Collecting supplemental data through standardized data-entry forms
• Applying standard, repeatable tax provision calculations that can be extended to suit organizational needs
• Using prebuilt functionality to calculate short- and long-term differences, with values populated using trial balances

Built-In Reporting & Analytics

A broad range of reporting and analytics capabilities reduces reliance on spreadsheets and fragmented reporting tools, increasing the speed, scope, and accuracy of reporting across the organization. Organizations must unify finance processes across the Office of the CFO while enabling self-service, easy-to-use reporting for a variety of stakeholder groups — a strategic framework that automates and streamlines financial reporting and addresses the needs of strategic partners in Sales, Operations, HR, and Line-of-Business teams, including ESG reporting.

Narrative Reporting

Traditionally, narrative reporting is a time-consuming, manual, complex, and inefficient process to collect comments, assemble data and reports, and create narratives. Organizations leveraging multiple tools struggle with duplicated data and metadata, cutting and pasting reports, data, and comments, and manually creating narratives in documents and spreadsheets. Organizations must break free of these challenges to take finance further. But what does good narrative reporting look like? An effective narrative reporting process should enable the following capabilities:

ESG/Sustainability Reporting

While the market offers plenty of standalone ESG/sustainability reporting tools, organizations must align that reporting with their monthly financial close, consolidation, and reporting processes — one system and workflow for data collection, with all financial and ESG data available in a single platform for reporting and analysis. As with other CPM processes, organizations should be able to set targets, budgets, and forecasts for ESG metrics, then track and compare actual results against them for reporting, analysis, review, and remediation, with configurable dashboard views of the key data and metrics.

An effective ESG/sustainability reporting solution should include:

Benefits of Mastering the Financial Close

Organizations can achieve the following benefits by taking the steps to conquer the complexity in the financial close process.

A single "data value chain" collapses multiple feeds of source data into one direct connection, then re-purposes the data for multiple processes. Organizations can then seamlessly move through reconciliation and attestation, then management reporting, and finally consolidation and financial reporting, with a single line of sight back to the original transactions:

1. Data connections — from on-premise ERP, cloud ERP, data warehouse, CRM, and material master systems.
2. Data quality & compliance.
3. Close & consolidation.
4. Analytics & reporting — with a single line of sight back to source transactions.