Avoiding the dreaded ‘last mile’ of finance

It’s an accountant’s worst nightmare – the dreaded last mile of finance, when a month’s worth of work is uncomfortably squeezed into a few days to ready the close for financial reporting and disclosure. Therese Tucker outlines how a Continuous Accounting process can provide relief. 

The financial close is a mad dash, in which accountants work long days, eat at their desks, and when a discrepancy arises, they tear at their hair trying to verify the source of the mistake.

Other casualties include the smart minds in Financial Planning and Analysis (FP&A) forced to wait until month-end to do the vital work of projecting the company’s financial future, rather than building their forecasts as the days go by. When FP&A is in limbo, so is the CFO. This is no way to run a modern finance organisation. Yet, it remains the case in far too many companies.

But there is a different way and it’s called Continuous Accounting. By automating the functions of accounting like account reconciliations, variance analyses and transaction matching, among others, closing the books is continuous. Instead of a manic rush at the end of the month, quarter or year to delve into the details, accountants attend to their activities at their own pace.

This is a revolutionary concept – closing at the speed of business. Instead of pulling accountants from their basic bookkeeping functions and pushing them into an intense period of financial data summations, reconciliations, error checking and correcting, the accountants are applying the allocations and making the necessary adjustments when they can – a little bit on Tuesday, a bit more on Wednesday.

Here are the top five reasons all organisations should institute Continuous Accounting.

1. Automated processes lead to greater accuracy

Accounting is plagued by spreadsheets. Enterprise Resource Planning (ERP) systems have long been an integral part of every finance organization, but they can only get you so far. Most organisations must still rely on spreadsheets and hours and hours of rote, manual labor to fill in the gaps left by their ERP systems in order to perform the close. The main problem with spreadsheets is that people use them, and people are prone to human error. As every accountant will attest, it is very difficult to detect mistakes in spreadsheets, particularly when they have a highly compressed period of time to do it, like the financial close. These complex workflows increase the threat of incurring a material weakness under Section 404 of the Sarbanes-Oxley Act (SOX). Automation provides a highly transparent way to collect, manage, track and analyse financial data and provides a level of control and visibility simply not available with spreadsheets as we know them.

2. Moving at the speed of business

Business occurs around the clock on a daily basis, while the activities to prepare the monthly, quarterly or annual close generally happen en masse. Why is it that Finance and Accounting (F&A) compresses 30 days of work into a five-day or more timeframe? By turning big tasks into incremental ones, accountants are put in charge of their work lives, and given the opportunity to assess the financial close throughout the close development lifecycle. Since Continuous Accounting is always ‘on’ – 24/7 – accountants can access the data they need to close the books ‘today’, discerning anomalies well in advance of the actual close. They can then respond to these discrepancies at their leisure.

3. Time freed is time invested

By more efficiently distributing the workload through Continuous Accounting, accountants are no longer restricted to a rigid period of time in which to perform their duties. An account can be reconciled immediately after the inception of the transaction, instead of putting it off to when there is a critical mass of transactions.

By aligning the work of accountants with the orderly flow of business, accountants are liberated to apply their particular skills to an analysis of the financial data. Accountants are freed from the enormous amount of time they spend collecting and verifying data, giving them the opportunity to redirect their efforts toward analyzing the data and being much more productive, strategic employees.

Continuous Accounting frees accountants to be more productive, forward-looking members of their organization.

4. Greater efficiency with less labour

When most of the duties in the financial close are put off to the end of the month, quarter or year, Finance often has to staff up for these peak overload periods. This is a highly inefficient way to manage an organisation’s F&A skill sets, resulting in bloated accounting departments, squandered time and excessive costs. By investing in the software that fosters Continuous Accounting, there is much less need, if any, for temps. Not only that, the number of hours spent by accountants to complete their tasks decreases.

5. Continuous Accounting fosters continuous improvement

Since business is inherently dynamic, a company’s policies, procedures and human behaviours must be flexible and adaptable. By providing the means to review transactions and other business data on a continuous, real-time basis, accountants gain knowledge into the organisation’s accounting processes to improve them on an ongoing basis.

With Continuous Accounting, CFOs and Controllers gain flexibility, in the sense that they can reevaluate how best to schedule and organize work aligned with the accounting cycle. This is what continuous improvement is all about – ongoing assessments of processes followed by thoughtful changes to improve their effectiveness and efficiency.

The benefits of Continuous Accounting are so powerful, sensible and strategic that the organisations that first implement these processes will gain a competitive advantage. By making more efficient and productive use of accountants’ time and valued work, CFOs, controllers, internal audit and the accountants themselves are better able to achieve the company’s strategic objectives at less cost, with the added bonus of more meaningful work.

Therese Tucker is CEO of finance controls and automation software company BlackLine.

 

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