Addressing Key Drivers of Manual Effort in the Financial Close & Reporting Cycle
Philip Boken (Sr. Advisor to Finance Leaders, SSA & Company)
| Oct 27, 2010Addressing the "Multiple Version" of the Truth Challenge: Finance Process Scalability and the "Circle of Distrust" in Financial ReportingMany finance functions are finding that a significant amount of hours are spent every month on a group of inter-related activities that can be called the "circle of distrust." We use this phrase, as concerns over the accuracy of the information, as well as the potential for "multiple versions of the truth" can cause this activity cycle to repeat itself within a given period, resulting in excessive handoffs, delays, and ultimately can lead to significant inefficiences and risk in financial reporting.
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Company: SSA & Company
Do you know how many you actually have each month? Have you calculated the time associated with data capture, analysis and review, and then compared the level of effort to materiality?
Company: SkyStem
Hi Philip
That is a great question as many finance functions view excessive journaling and recons as a "necessary evil" from the output of SOX and have learned to live with it, forgetting that precious resources can be used more strategically (and happily!) by cutting down on these activities.
Company: SSA & Company
If they keep happening, is it really a surprise?
Company: SSA & Company
If you are looking to improve the efficiency and effectiveness of your close process, we find that accruals can be a gold mine of improvement opportunity. Many companies hold major sub-ledgers open until D+5 or longer, waiting for all the information to come in so they can book to actual. We often find that the incremental amounts are not material, yet hold up the overall process. Booking to actual is not an estimate. We have found others that rely on their FP&A group to create the accrual with limited involvement of accounting - there is some risk in this approach, and we have found cases of booking to forecast and/or "surprises" that have appeared much later in the game due to this lack of oversight from accounting. If you have a lot of post close adjustments and/or "surprises," it may be worth your while to conduct a "deep dive" in your accruals processes.
Company: SSA & Company
I continue to be amazed by how many companies (public and private alike) that continue to rely on offline spreadsheets when they have a leading ERP. How can finance have a truly transparent financial reporting process when they have hundreds of spreadsheets that download data from multiple sources of the truth and then manipulate them to produce their final reports. If you have this problem, there is a way to both control them and establish a process for driving the data requirements into your core reporting solution. Feel free to contact me for more information. philip [dot] boken
protiviti [dot] com