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Five Best Practices for a Successful Financial Close

In a recent Proformative webinar titled "Five Best Practices for a Successful

In a recent Proformative webinar titled "Five Best Practices for a Successful Financial Close," various directors working for software firm SAP presented information on how corporate finance officials can close their books in an accurate and deadline-oriented manner.

Pressure on Finance Officials

In the current economic climate, financial decision makers are under pressure to close their books in the aforementioned way, and in addition they also need to ensure that they comply with relevant regulations, meet external reporting requirements and cut down on errors, all while reducing the associated costs. 

Challenges in Financial Closing

When speaking with finance officials, SAP found that everyone wants to close their books in a more timely nature. Unfortunately, there are various challenges that could obstruct this desire. Companies face an increasingly difficult environment in terms of both regulations and compliance. The optimal amount of information that companies should disclose is also challenging to determine.

Closing Cycle Process Analysis

It is important to start in the right place by taking steps to boost employee efficiency and also automate tasks when possible. Elizabeth Milne, director, SAP stated that it is important for the stakeholders in the closing process to perform an "as-is" review. Doing so entails assessing one's vision, which means evaluating existing processes related to closing, as well as analyzing objectives. She said that establishing benchmarks to gauge performance is crucial. There are various methods out there to measure success.

She said that the next step is obtaining executive sponsorship. She iterated that this step is crucial, as companies with top officials who want to shorten their close generate far better results than firms that do not gain buy-in from their executives.

Quick Wins

The expert suggested that focusing on fast ways to win is a good idea, which includes evaluating internal employees in order to figure out how to coach both the top performers and the low performers. It is also important to make sure crucial tools like software programs are used in an optimal way. The objective of successfully leveraging these tools is to make sure that restatement is not needed. Another helpful tactic is to execute reporting through XBRL.

Milne said that traditionally, individual reporting units of companies send their data to the headquarters office, which then aggregates the data and then reaches out to the individual reporting units so that they can make corrections and ensure the accuracy of information and make sure that the inter-company data is reconciled.

A faster way of doing things would enable peer-to-peer communication, meaning that the individual reporting units could collaborate instead of having to wait for headquarters.

Big Wins

The next step recommended by Milne is for the key stakeholders in the financial close to seek out big wins. Disclosure and reporting is a crucial area, and involves preparing and then submitting financial statements to the proper regulators, as well as providing these communications to investors. It is crucial to gather all needed information from the software applications that have aggregated the data, and then put that information into specific formats for reports.

Post-Project Review

Once the project has been completed, a review should be conducted, including how processes were executed and what the final results were. At this point the benchmarks that were previously chosen can be used to assess performance, and new methods of measurement can be picked if necessary. The context that should be utilized when analyzing efforts and their results is one of generating continuous improvement. 

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