Using the cloud to benchmark the corporate financial close

BlackLine

Benchmarking is a favoured tool among senior managers for monitoring business performance. Todd Hunt discusses how using a cloud solution can offer new opportunities to gain insight into the financial close.

The ability to compare the performance of one company with others in the same industry can highlight anything from service levels and product quality to the efficiency of administrative workflows.

Traditionally, one of the biggest challenges faced when undertaking benchmarking is finding appropriate, trustworthy and up-to-date comparison data. Some organisations try to overcome this by embarking on informal benchmarking. They try to gather trustworthy data from published sources such as annual reports and accounts or make use of benchmarking services marketed by specialist providers.

However it can be difficult to find an independent, objective source of data that exactly matches the desired criteria. This matters greatly because the key to the value of benchmarking lies in the quality of the ‘match’ between the circumstances of the organisation and the benchmark database.

Benchmarking the financial close

Reliable benchmarks around the efficiency of the financial close process are particularly difficult to find. Most of the publicly available benchmarks revolve around ‘average days to close’ and, for publicly quoted institutions, the elapsed time from year-end to earnings release and audit sign-off.

While these comparisons can yield broad-brush comparisons, they are unable to provide deeper insights because little is known about the particular applications used and the way in which resources are being deployed. Without a complete picture, it’s simply not possible to draw accurate conclusions about performance and productivity.

Selecting the correct dimensions for comparison can also be a challenge because even companies within the same sector and of equivalent size can have completely different operating models. For multi-nationals, overall structure, accounting policies and degrees of autonomy given to operating businesses can have a profound effect on the efficiency of the financial close process. This can make an ‘apples with apples’ comparison very difficult.

Putting the cloud to work

The benchmarking industry is experiencing a period of fundamental change as more companies take advantage of cloud platforms to support their accounting activities. As a result of this trend, cloud-based vendors of finance applications have access to information about how their applications are used by different companies.

By providing this information in an anonymised and secure way, it can form the foundation of a new model of benchmarking that offers unique advantages. These advantages include:

  • Level playing field: When benchmarking core financial processes, it is often not possible to make exact comparisons because of doubts about the equivalence of the underlying technologies and systems. With benchmarking in the cloud, each company participating in the benchmark is using exactly the same technical environment.
  • Real-time data: The data being used is available in real-time which allows participating companies to compare results at any given point in time, rather than relying on survey data that may be months or even years old. In addition, comparisons can be made at month-end or year-end to give a detailed view of comparative performance at peak times.
  • Single application: Having all organisations in the benchmarking using the same single application removes doubts about what is being measured because the terminology and benchmark calculations are consistent across all participants’ data. Performance measures derived from a cloud-based benchmarking engine are therefore reliably the same.
  • Location independent: The advantages that drew a participating organisation to the cloud in the first instance also apply to benchmarking. For example, the results can be made available to participants whenever and wherever they are situated, allowing insights gleaned from a cloud-based benchmark to be widely distributed.
  • Data integrity: The data used is derived directly from the application and not a survey, thus eliminating doubts about its trustworthiness and provenance.

Next-generation benchmarking

Benchmarking in the cloud can be transformational for companies since it provides real-time data and insight into their performance. The true value comes from knowing that all participants being used for comparison are using the same application for the same purpose – financial close.

The insights gleaned can provide the foundation for new collaboration amongst finance teams as they strive for continuous performance improvement. The use of cloud-based services in this way represents the start of a new era in benchmarking and the data set can only become richer and more useful as it grows over time.

Smart CFOs know that process innovation and automation can make a remarkable difference to the performance of the modern finance function. Cloud-based benchmarking provides a unique opportunity to make a step change in how this is achieved.

Todd Hunt is vice president and general manager, Asia-Pacific at BlackLine, a provider of a unified cloud platform supporting the entire close-to-disclose process.

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