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

Anything we do in Finance we should ask, “Why?”. There is always plenty of work for the finance team so if we can’t answer why take on something more then we shouldn’t do it. So, why is it important to have a faster close? In addition to the obvious benefits of saving of time and resources, there are also strategic reasons WHY:

  • It is an indication of a company’s commitment to financial excellence to both the Board of Directors and Investors. Instilling confidence there can have a positive impact of share price.
  • A faster close means Finance can be more strategic and less tactical. It gets you from compilation to analysis faster giving you more time to analyze and react to make the right decisions faster which can giving your company a competitive advantage.
  • Providing the CFO and the Board with financials they trust faster, and being a more strategic part of the organization is a good way to advance your career.

In my first blog I discussed how pre-close activities and involvement of the field early on can shave time off the close process. Now I want to focus on the rest of the process - financial consolidation and the post-close cycle.


Consolidation - automation leads to advantage

The first key to success is automating the interfaces to your reporting entities’ systems. In a perfect world you would have a single common system, but if that is not in place, having direct links to the reporting databases speeds up the process, eliminates manual mapping and reconciliation processes, and minimizes errors.

Another key is having advanced calculations done during the consolidation, automatically. This includes all the basics, such as currency translation and intercompany matching, but also the more advanced calculations such as cash-flow, advanced allocations, minority interest, product profitability, etc. If you are spending time augmenting your consolidation with outside Excel sheets, there is great opportunity to save time, reduce errors, and improve auditability and visibility throughout the process. It also gives you a competitive advantage with additional real-time analysis capabilities that take into consideration currency impact, intercompany and adjustments for a complete picture of financial performance.


Post close - should not be serial

This post-close part of the cycle is often considered a separate process, but the reality is the whole process needs to be considered to make real progress in shortening the entire close-to-disclose process. Today’s reporting requirements go beyond financial reports; they include the narrative associated with these reports that give insight to management and investors delivered in the format that they want to consume it (Word, PDF, PowerPoint etc.)

Producing your disclosure documents such as 10Q, 10K or Annual Reports, should begin during the financial closing cycle, not after the numbers are closed and finalized. There are many moving parts, some of which are dependent on others and some that are not. Contributors from each department should start “commenting” on their own sections right away, which avoids having the core finance team having to do the bulk of the work. Setting up a process flow allows you to start activities earlier in the process and easily see where the dependencies and roadblocks are so you can address them earlier in the process eliminating delays. It allows you to start the process earlier, work more efficiently, and finish sooner.  


Treat auditors as partners

Lastly, do not wait until the end of the whole process to then bring in the auditors and lock them in a room for days to go over the mounds of data that result in scrambling to answer their questions at the end of the process. Have them begin consistently validating the numbers throughout the close and disclosure cycle and build in an audit trail that allows them to find many of the answers to their questions on their own.  Have them as partners - get their input on new policies or standards that you may want to embrace. This eliminates some of the stress of the audit that can create an adversarial relationship between Finance and auditors. When you make the auditors life easier, it makes your life easier.

What are your thoughts? Where are the bottlenecks in your cycle? How do you deal with them?



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

Tagetik Collaborative Disclosure Management

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