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How to speed up your closing cycle: Part 1- the importance of the pre-close

Feb. 20 2014 by Alessio Lolli, Vice President and General Manager - CCH Tagetik North America

Consolidation & Closing

Let’s be honest, a close cycle can never be fast enough. Finance departments have had this as a goal for as long as there have been ledgers. And progress has been made, mainly though technological advances and the use of financial consolidation and reporting software. But over the past few years the cycles have begun to slow down again.

A recent study by Ventana Research found that on average companies take longer to close now than they did 5 years ago. New reporting requirements (i.e. XBRL), limited resources and aging systems are part of the cause.
In this blog series, I am going to focus on what can be done to speed things up.  

The first area to look at is your pre-close cycle. Many companies don’t focus enough here and end up tracking down issues and making adjustments during the corporate close cycle. You want to move more processes down to the field where they are closer to the issues and can resolve things faster.

  • Intercompany matching and reconciliations – have the field perform this function before the close cycle. They know the transactions and should perform this function almost real-time with their sister business units.
  • Sub-ledger to GL reconciliations – similar to intercompany, the field can reconcile these subsystems (i.e. AP, inventory) much faster than you can at the consolidated corporate level
  • Standardize systems throughout the organization – having disparate systems, with different charts of accounts slows down the process and introduces potential for errors.  
  • Introduce validation and checks throughout– by automating validation checks at each step, you minimize the adjustments and reconciliation errors later.  

Each of these steps is based on the same concept: minimize the amount of reconciliation and adjustments needed during the consolidation and closing cycle.  Moving this responsibility down to the field, where the people are closer to the business, is key to speeding up your close.

Stay tuned for Part 2!

What are your thoughts? Any other insights into speeding up the pre-close cycle?

Read more... How to speed up your closing cycle: Part 2- Incorporate both Financial Consolidation and Disclosure Management

Tagetik Collaborative Disclosure Management

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