Financial Close: Reliability Vs. Problems Arising From Improvisation

 Inexplicably, the accounting close is still an adrenaline rush for their CFOs and accounting managers of some companies. These managers still cling to accounting close systems of the past in which many tasks are done manually and even using spreadsheets. 

“Improvisations are better when they are prepared.”  William Shakespeare 

Unreliability in the financial close process leaves CFOs exposed to all kinds of unforeseen events, some of which can lead to delays in the accounting and financial close and create internal problems within the organisation. 

As William Shakespeare said more than 400 years ago, improvisations are better when they are prepared. In this sense, unforeseen events may arise in any accounting close, but if the company has FPM software to perform the accounting and financial close, the accounting and finance team will be much better prepared to give a quick and reliable response to any contingency that may arise. In addition, by being freed from routine and repetitive tasks, and not having to update tedious spreadsheets, they will have much more time to control and monitor the process. 

Internal problems resulting from an accounting close that is too exposed to unforeseen events and improvisations 

If the accounting and financial close is too exposed to unforeseen events and improvisations, various kinds of internal problems may arise within the organisation. Winston Churchill once said: ”I am going to prepare tomorrow’s improvisation”. 

Among the internal problems that may arise within the organisation we can highlight the following: 

• Tensions within the accounting and financial team. The solution to contingencies that may arise due to unforeseen events and failures in the accounting and financial close will overload the work of the accounting and financial team, which will have to take time from other tasks or work overtime to solve the problems that may arise. 
• Problems with managers from other functional areas. The managers of the various functional areas of the company will demand to have the accounting close information that affects their areas as quickly as possible and error free. If the close is delayed due to unforeseen events, this can generate tensions between the CFO and other functional areas. It should also be kept in ind that financial managers, because of the information they handle, often encounter problems of profitability in other areas, overspending or any other kind, so that problems emanating from the finance department and affecting other functional areas may be an opportunity for some managers to settle accounts with CFOs. 
• Tensions with the accounting and financial teams of the subsidiaries. Errors and unforeseen events can create tensions between the subsidiary and head office teams, as both errors and unforeseen events result in additional working hours, which can affect both head office and subsidiary accountants. 
• Tensions with the CEO. The CEO needs to have the accounting and financial close information as soon as possible. If the CFO starts telling him about his problems and unforeseen events, this can lead to tensions between them. In addition, the CEO may become involved in these problems and come to the conclusion that the use of FPM software would avoid them and significantly improve the accounting and financial close, demanding explanations from the CFO as to why FPM software has not been implemented to facilitate this process. 
• The need to reinforce the accounting and finance team. An accounting close that significantly alters the normal operations of the company and in which it is also common for multiple unforeseen events to arise, may imply the need for new additions to the accounting and finance team. These new incorporations imply the need to train and integrate these new professionals at a time when the professionals already working in the company are overloaded with work. Therefore, the new incorporations, although on the one hand they can be helpful, on the other hand will involve tensions due to the adaptation and training of the new personnel at a time of internal tension caused by the overload of work. 
• Tensions with the auditors. According to Article 210 of Royal Legislative Decree 1564/1989, of December 22, 1989, approving the revised text of the Corporations Law, the auditors shall have at least one month of time to submit their report after the accounts signed by the directors were delivered to them. Unforeseen events may delay the delivery of the accounts to the auditors and generate tensions between the auditors and the financial directors if these unforeseen events affect the auditors’ work. 

Although it is not easy to take the initiative to make changes regarding financial processes, a good CFO or controller must always look for continuous improvement of these processes. 

Financial Performance Management (FPM) software helps CFOs and controllers to have more reliable and efficient financial processes by improving data quality, simplifying the management of financial processes and automating financial reporting, thus facilitating decision making. 

In addition, the use of an FPM solution will avoid unpleasant unforeseen events and allow more work to be done with fewer human resources. If the company grows, the workload does not increase, as the FPM solution takes care of the increased processing of financial data reliably. 

LucaNet’s FPM solution uses Extract-Transform-Load (ETL) technology to extract, transform, load and aggregate financial figures, facilitating decentralised financial data extraction. 

In addition, data can be extracted from different ERP systems, facilitating their connection to a single source. With this data integration it is possible to respond to the current demands of consolidation and reporting, facilitating a better understanding of the business, having in real time a complete view of the business summarised in its key indicators (KPIs). 

To learn more about more efficient close process, head over to our e-book: ‘Faster Close’: Learn More