I've been in the
What are the greatest challenges in the month end and year end Financial Reporting Process?
Answers
Damian,
My gut answer to your lead question is "knowing what to estimate and how to estimate it; knowing what to reconcile and how; and knowing the difference."
Most of my companies have been multi-national / multi-currency, and having an integrated GL that allows for this is the difference between Excel-hell and a smooth process.
Of the list you've given, the most critical process-oriented piece would have to be real integration with the other systems, or failing that, the ability to import Journals efficiently.
Cheers
Keith
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Good question, Damian,
You might want to look at this
"A Faster Year-End Close"
https://www.proformative.com/whitepapers/faster-year-end-close
Enjoy!
Best... Sarah
Keith,
Your feedback is most appreciated. I agree that the most critical piece would be an integration tool that could connect to a diverse group of ERP/Accounting/Excel systems. I suspect that some of the companies that sell consolidation software in the market now struggle with this piece of the puzzle. It's probably an expensive (sometimes hidden cost) of properly integrating (most likely "Made to order" for each client site) a diversity of accounting systems.
Thanks again,
Damian
Hi Damian,
You raise very interesting issues and I completely understand your position.
I too was involved in closing the books as a controller for more than 15 years and more recently am involved in an organization helping finance departments become more effective. What we have found is that it is not always the tools or systems which cause the issues with getting accurate financial statements on time, it is often the process and the people. Having a well documented process which is consistently updated and includes all the steps necessary to close the books is more important than the various systems.
There are many "last mile" systems, ranging from Adaptive Planning or Host Analytics for cloud based consolidation and reporting to Hyperion or BusinessObjects for on premise larger organizations. More recently some business intelligence (BI) tools are touting their ability to collect data from disparate systems.
In the end though, the final steps of the last mile is the finance team collating information into a document for presentation to the CFO, Audit Committee or SEC. An error or mistyped number at this phase could negate all the hard work which precedes it.
World class organizations focus on improving their process in order to make their accounting close better.
One of the things I always find that is lacking but seems so simple is exception reporting. It seems like there is always some error/miscalcuation that should have been obvious. We are always trying to automate reports that look for and highlight possible issues (based on rules we define) rather than data dumps. A very simplistic example would be assets with credit balances, liabilities with debit balances, etc. Another is dollar ranges for specific general ledger accounts that should be reviewed.
In my experience running interim reports and eyeballing for any peaks & valleys and then further drill down and pinpoint the item and source for such fluctuation. Verify the validity of such item/s and then go on from there on and you should have a pretty much smooth month end, year end close. And this process is performed on a ongoing basis all through the year. Although this may not be one size fit all scenario, but most of the large organizations where all the data is pretty much interfaced and limited # of manual entries are posted.
The ability to do recurring entries helps speed up the close process. Enter it once, repeat 11 times to cover the remainder of the year, done. A real time saver. I would LOVE to see an integrated depreciation calculator, which I suspect would be inherent to an asset management module. I hate generating and managing depreciation schedules for all of the assets a company might have and acquire.
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I agree and related delays come from manually maintained schedules for things like prepaids, etc. We have been pushing our ERP vendor to provide automation in this area for a while via their customer portal. They have similar coding/functionality built in around revenue recognition and it lends itself well to this area.
Hi Damian, I have a 2-part answer for you. First, there are some great modern accounting systems out there that deliver many of the things on your wish list for financial reporting: pre-built reports, automatic currency conversion and adjustments, separate and consolidated reporting, smart rules for exception reporting, recurring entries, automatic reversing entries, integration with other business systems, etc. I know this because at Intacct we use our own software for a fast close every month, and it does all these things and more. There's not much left on my reporting wish list.
Second, it was mentioned above, but process really matters. We have a detailed close plan and calendar and a staff that knows what needs to be done every time. It's important to pay special attention to the riskier areas that can be subject to interpretation, like revenue recognition, so we don't have to go back and make adjustments later.
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Marc,
I agree with your listing as well as the concept of a good closing plan "The last mile" as well as items subject to
Thanks much,
Damian
Hi Marc - my note regarding prepaids relates to Intacct by the way. It's something in the Ideas portal that your users have been pining for.
Hi Damian, I can sum up everything into two words: integration and customisation. In addition, I also think during implementation period all users should have satisfied themselves of what they expect from the system.
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Oladipo,
Well said! 1. Integration, 2. Customization and 3. User satisfaction and expectations. I'm repeating what you said because it sums it up so well. Thanks for your input.