As we approach the end of the year, we also approach the season that many finance leaders and staff dread the most: the yearend financial closing. For a large number of companies that follow the calendar year as their fiscal year, this is when they toil long hours to close the books for the preceding year, requiring volumes of information from line-of-business.
I once wrote that the “reason this activity is so horrendous is because of the time-consuming, convoluted close-to-disclose process that is likewise headache-inducing,” adding that “finance department staff in the frontline work through weekends to get the job done, which is not easy or always perfect.”
In 2015 I wrote that “many laggards in a global study of financial consultants Hackett Group take 30 days to close the books, costing these companies 13 percent of the total company revenue,” adding that “these costs come from using too many resources to accomplish what should be nothing more than a mechanical task, which should have been allocated for solving other more important issues in the finance department.”
“[A] part from the intense manual labor and long working hours, these companies face greater risks due to human error in using multiple spreadsheets and manipulating complex business data. Many spreadsheet error examples abound that resulted in financial and reputational losses,” I wrote then.
Because of the Covid-19 pandemic, which forced companies to adopt work-from-home arrangements, finance leaders are more challenged than ever to manage a period-end close. The distributed, decentralized and distracted finance workers need to learn how to collaborate virtually across different locations amid the spotty internet connectivity that hounds many.
That’s why financial leaders need to take stock on how to effectively management financial close in a virtual setting. According to BlackLine, an effective virtual financial close is the successful monitoring and execution of period-end financial close processes in a distributed environment; a virtual close means accounting and finance teams can collaborate from anywhere to unify data and processes across disparate systems, with visibility and reporting on all activities, to be able to close with confidence in uncertain times.
Global audit firm KPMG prescribes five considerations in achieving an effective virtual financial close. First, manage your virtual calendar by realigning the close calendar and establishing a new task cadence, based on virtual availability of resources.
Second, strengthen your organization by deploying a buddy system for key resources and a “pitcher/catcher” model for schedule continuity.
Third, manage technology by identifying and mitigating critical points of technology failure, including system access, system availability, collaboration tools and extra monitor.
Fourth, establish a remote etiquette where the video is always on, adopt less formal communication among employees, use instant messaging for collaboration, test audio and video before calls, and avoid multitasking while in a videoconference.
And fifth is monitor tasks by using a central dashboard (e.g., Excel) to monitor and track close tasks, and create a project management office for oversight.
An effective and accurate financial close is requisite in providing the organization’s executives a clear picture on the state of the company’s financial position amid Covid-19.
Finance leaders need to learn and adopt effective virtual financial close approaches in order to deliver these.
The author is the chief executive officer of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is a fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA program of De La Salle University. He may be reached at firstname.lastname@example.org.