The 6 biggest challenges with financial close and reporting (and how to address them)

Many financial processes are time-intensive and require hours of hard work from multiple teams. However, few of these are as intensive as financial close and reporting, especially for organizations with multiple subsidiaries. Without dedicated efforts to improve your financial close, this process can quickly become so unmanageable that your entire team will be working overtime every month.

The biggest challenges with financial close and reporting

No one will argue that properly closing the books is essential for keeping organizations compliant, financially healthy, and growing steadily. However, the financial close process can be one of the most time-consuming and resource-intensive endeavors for a finance team, causing headaches for all involved. Here are some of the financial close challenges you need to watch out for if you want to reduce those headaches.

1. Irrelevant financial statements

One of the key outputs from your financial close process is financial statements that leaders can use to report to shareholders, evaluate the organization’s financial health, and make decisions that keep things moving in the right direction. But since a financial close can take a notoriously long time, finance teams often find themselves racing against the clock to produce timely, relevant statements. Too often, this feels like an impossible task. Any attempt at accelerating the financial close process is usually spurred by a need for more timely financial statements.

2. Data quality

Financial data can be inconsistent, especially across multiple subsidiaries or locations. Between unpaid invoices, missing updates, and incorrect currency conversions, not all the data you get for your financial close will be high-quality. This can create extra work for your team as they process, clean, and follow up on poor-quality data.

3. Disparate teams

Once your organization reaches a certain size, you will likely have to work with remote teams —even in different time zones. This can make collaboration a lot trickier. Meetings must be held at times that may be inconvenient for some, days can be lost as important files are sent at the end of the day for one team but the middle of the night for another, and getting everyone on the same page is a lot tougher when you can’t bring them all together in the same room.

4. Mismatched systems

Whether your organization has multiple locations or subsidiaries, your financial close process will involve multiple systems that may not integrate well with each other. Some teams might use manually updated spreadsheets to track orders, while others handle everything with advanced accounting software. With each financial system being completely different, your financial close process account for the extra time it takes to translate all this data into something useable.

5. Human error

All financial processes—especially those that rely on manual inputs—can be fraught with errors. Data entry mistakes and typos can insert irregularities in your financial data that may go unnoticed until it’s time for your financial close. The team handling the close then must be vigilant enough to spot these errors as they work. They’ll also spend precious time following up on misentered amounts with the right people to fix them.

6. Proper resourcing

Like many processes that involve the finance team, it’s too easy to not think about financial close and reporting until the 11th hour. This can lead to overworked teams with not enough time to close the books effectively or the right software to work efficiently. While some leaders may think of these processes as little more than a box to be checked, the Office of the CFO knows just how crucial they are for the organization. This can lead to a tug-of-war as finance leaders try to get more resources for their teams that other leaders aren’t always willing to provide.

Leaders have access to financial information more quickly

All sorts of leaders rely on financial statements to report on the organization’s performance, make decisions, and plan future initiatives. The longer leaders have to wait for these statements, the more time their tasks will take. By optimizing your financial close process, you can get these statements out faster, leading to more efficiency for your leadership team. 

No more late nights for the Office of the CFO

Perhaps no process involves as many late nights for accountants, controllers, and other professionals in the Office of the CFO as closing the books. When so many leaders and departments depend on having up-to-date financial statements, there is a ton of pressure to get things done as quickly as possible—all while avoiding errors. When you take the necessary steps to improve your financial close process, you can drastically improve work-life balance for everyone in the Office of the CFO.

More relevant financial statements

If financial statements take too long to prepare, they have little relevance for the leaders and teams that rely on them. That’s why one of the biggest benefits of improving your financial close process is speeding up the delivery of financial statements, meaning they reflect current information—making them more relevant for everyone.

Exponential increase in efficiency

Does your financial close process feel more difficult every month? That’s because inefficiencies don’t just add up, they increase more rapidly. Data entry errors, disparate systems, and inaccurate processes combine to make closing the books increasingly complicated. When you revamp and streamline your financial close process, you reverse this trend and add improvements that compound exponentially. Each month, your financial close gets quicker and easier as your teams adapt to the new process and find new innovative ways to be efficient.

Consolidation-level improvements

Consolidating data from multiple entities can be tough, but there are ways you can improve this aspect of your process as well:

• Standardize your chart of accounts across the organization by considering all parameters required for consolidation and group reporting.
• Streamline organizational structure (e.g., shuttering or merging dormant companies).
• Set strict materiality guidelines with the agreement of auditors.

Technical improvements

If the entities involved in your financial close process are still using spreadsheets for most of their work, you can make technical improvements by automating:

• Controls, from entity submissions to the consolidation level, with validation rules
• Reconciliations for intercompany balances and transactions
• Financial and management reporting
• Currency conversion
• Eliminations and adjustments
  

You can also use a financial performance platform that automatically monitors workflow, status, and validation results.

One of the best ways to roll out these technical improvements to all your entities with a minimum amount of work is by adopting a fully integrated financial performance platform like Prophix. Financial leaders, controllers, and CFOs need a platform built with their needs in mind, including features that help streamline financial close like automated account reconciliation, streamlined data collection, AI-assisted anomaly detection, and more. Get a free demo of Prophix in action here.