The financial close is dreaded for a reason: nearly 70% of close processes suffer from errors. The average completion time extends to over five days on average, causing significant stress for finance professionals. From tracking data from systems to reconciling accounts and verifying records, the financial close is a tough nut to crack, especially for e-commerce vendors, supermarkets, banks, and such high transaction businesses.
In the process, finance and accounts teams often have to work with outdated systems and error-prone manual processes. The sheer volume of data is often overwhelming and collecting financial data from other departments is a logistical nightmare.
Well, no more! Follow these proven strategies to streamline and fasten this process and deliver accurate financials on time.
Tips To Speed Up Financial Close In High Transaction Businesses
Eliminate Manual Data Handling
Accuracy is everything in accounting. Yet, many accounting departments, even for high transaction businesses, still rely on spreadsheets and registers for invoices, payments, and other critical information. Each manual entry introduces the risk of human error. Automating the data handling process via software like Bluecopa can help reduce errors and speed up the process.
Keep Your Chart of Accounts Simple
Complex charts of accounts are common in high-transaction businesses, but they are a breeding ground for errors. While mistakes are rare, their impact grows proportionally with transaction volume. Even a small error rate will lead to substantial inaccuracies in high-volume operations. Correcting these errors is time-consuming and often overlooked.
Chart complexity arises from the need to track operational performance. The best way to simplify your chart of accounts is to find alternative performance metrics. Let’s say your company processes millions of transactions monthly and has a chart of accounts with 500+ accounts. If you bring down the number of accounts to around 100, you can significantly reduce errors and improve data reliability. For instance, instead of having separate revenue accounts for each product category (e.g., electronics, apparel, home goods), create broader categories like "Digital Products," "Physical Goods," and "Services.”
Establish a Strong Financial Control Framework
A well-structured financial control framework is essential for accelerating the close process while maintaining accuracy. We’ve formulated a three-step process for optimizing processes:
- Standardize Procedures: Create checklists and workflows for tasks like journal entries, reconciliations, and account analysis
- Centralize Data Management: Implement a single, reliable source of financial data, like an ERP system or data warehouse, to improve data quality and streamline reporting
- Monitor Continuously: Use key performance indicators (KPIs) and dashboards to track close progress, identify bottlenecks, and detect mismatches. This allows for early intervention and prevents potential delays.
Let’s say you run a manufacturing company looking to standardize your month-end closing process. Start with creating detailed checklists for each department involved and centralizing inventory data in a single system. In addition, monitoring metrics like inventory turnover and production costs is necessary to identify potential issues early in the month.
Leverage Automation and Technology
Leverage the latest technological advancements to dramatically accelerate financial close cycles. For instance, AI can help handle repetitive, rule-based tasks like data entry, reconciliations, and journal entries. It can also automate processes and save considerable time.
A study by McKinsey found that finance functions that have adopted automation technologies have reduced close cycle times by an average of 30%. Cloud-based accounting and financial management solutions offer real-time visibility, collaboration, and scalability. Similarly, data integration between systems eliminates manual data transfers and reduces reconciliation errors.
For instance, large retail companies like Walmart and Coke Canada Bottling deploy RPA bots to automate the extraction of sales data from multiple point-of-sale systems, reconcile it with inventory data, and generate accurate sales reports. With finance automation solutions, you can make the revenue reconciliation process much easier with features to automate workflows, transaction matching, data consolidation, etc.
Encourage Departmental Collaboration
Straightforward financial closes depend on effective collaboration between departments and clearly defined roles. When your other departments work closely with your finance department, it becomes easier to identify bottlenecks, improve communication, and enhance overall efficiency. Clear roles and responsibilities also ensure accountability, reduce errors, and continuous improvement.
Suppose you want to streamline your inventory valuation process. You’ll have to assign data collection to your operations team, reconciliations to finance, and analysis to the supply chain. This will make revenue reconciliation easier, leading to faster financial closes.
Connect All Core Financial Systems
Establish a comprehensive and integrated financial ecosystem for accelerated financial closes in high transaction businesses. Start with unifying discreet systems and automating data flows. Doing so will visibly reduce manual effort, errors, and the time spent on reconciliation.
If you, for instance, integrate your enterprise resource planning (ERP), accounting, and customer relationship management (CRM) systems, it creates a single source of truth for financial data. It also guarantees consistency across departments.
Revenue automation platforms like Bluecopa provide a Single Source of Truth (SSOT) and integrate all your accounting systems (ERP, invoicing platforms, accounting software) in one place. This means you reduce the risk of errors, avoid duplicate entries, and gain superior control of your accounts.
It is time to end your struggles with financial close processes by using the right tool for the job. Bluecopa is designed to streamline and optimize financial operations, making it particularly suitable for high-transaction businesses.
Bluecopa connects to ERP systems, accounting software, and spreadsheets to automatically collect and integrate financial data. Bluecopa automates tasks like matching transactions and highlighting discrepancies making the reconciliation of accounts quicker and more efficient.
FAQs
1. What is Financial Close?
The financial close process involves finalizing and reconciling a company’s financial records at the end of a period to ensure accuracy and compliance. It includes preparing financial statements and addressing discrepancies across accounts.
2. What is the Financial Close of a Transaction?
The financial close of a transaction refers to the finalization and recording of all financial aspects of a specific transaction, ensuring that it is accurately reflected in the company’s financial records. This includes verifying that all associated payments, receipts, and documentation are complete, properly recorded, and reconciled within the relevant accounts.
3. What is the Difference Between Financial Close and Consolidation?
Financial close refers to the process of finalizing and reconciling a company’s financial records at the end of a specific period, ensuring all transactions are accurately recorded. Consolidation, on the other hand, involves combining financial data from multiple subsidiaries or business units into a single set of financial statements for the parent company. While financial close focuses on closing the books for individual entities, consolidation aggregates the data to present an overall financial picture for a group of entities.
4. What is the Difference Between Month-End and Year-End Financial Close?
The month-end financial close involves reviewing and reconciling financial transactions for a single month, ensuring ongoing accuracy of records for performance tracking. The year-end financial close is a more comprehensive process that finalizes accounts for the entire fiscal year, including preparing detailed financial statements, completing tax filings, and ensuring compliance with regulatory requirements. Month-end closes focus on short-term reporting, while year-end closes involve a full review for annual reporting and auditing purposes.
