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What are the greatest challenges in the month end and year end Financial Reporting Process?

Damian Childress's Profile

I've been in the Accounting profession at various levels over the past 30 years. During that period, I have watched accounting systems advance and automate in many respects. In most cases it seems that the financial reporting module, in most business systems, seems to be the step-child. As a controller and later as a consultant, it seemed that it was always a massive "Jump through hoops" process to consolidate the trial balance into an Income Statement, Balance Sheet and a Statement of Cash Flows. It was hard for a single location business and daunting for a multi-division company. Most times, for many ERP systems, the consultants or the vendor would state "Dump the trial balance into Excel". Well, in most cases, that was always labor intensive and error prone, even if you could easily import the trial balance into Excel or other spreadsheet. It brings me back to the question above: What would be the most valuable and helpful components of a financial reporting system? What features would help you close the period faster? I can think of features I would value in a financial reporting package: Budgeting, Foreign Currency, Top Level Journal Entry screen, ability to create entity templates for each division and/or department and be able to consolidate in various ways, a reporting design template, (security for access to all these levels of information of course) and a data integration system that could easily pull all the journal entry data from diverse systems (ERP, worksheet, etc.) into the financial reporting module. Am I missing anything? What would the rest of you value and look for? Most of the ERP packages always fall short when it comes to Financial Reporting (Compliance and Management Reporting). What are you thoughts?

Answers

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

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

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Good question, Damian,

You might want to look at this white paper here on Proformative:

"A Faster Year-End Close"

https://www.proformative.com/whitepapers/faster-year-end-close

Enjoy!

Best... Sarah

Damian Childress
Title: Management Consultant
Company: Independent Consultant
(Management Consultant, Independent Consultant) |

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

Jeffrey Chalmers
Title: President, Financial Effectiveness Team ..
Company: Silicon Valley Accountants
(President, Financial Effectiveness Team Leader, Silicon Valley Accountants) |

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.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

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.

Vivek Dudgaonkar
Title: Finance Director
Company: Columbia Heights Shaw Family Support Col..
LinkedIn Profile
(Finance Director, Columbia Heights Shaw Family Support Collaborative) |

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.

Mark Sutherland
Title: CFO
Company: Profit By Design CFO & Controller Servic..
(CFO, Profit By Design CFO & Controller Services) |

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.

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

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.

Topic Expert
Marc Linden
Title: CFO
Company: Intacct
(CFO, Intacct) |

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.

Damian Childress
Title: Management Consultant
Company: Independent Consultant
(Management Consultant, Independent Consultant) |

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 risk.
Thanks much,
Damian

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

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.

OLADIPO IPAYE
Title: Group Head, Business Development
Company: Fintrak Software Co. Ltd.
(Group Head, Business Development, Fintrak Software Co. Ltd.) |

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.

Damian Childress
Title: Management Consultant
Company: Independent Consultant
(Management Consultant, Independent Consultant) |

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.

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