Part 1 in the Continuous Accounting Series.
In 2014 I co-authored the book “Accelerated Financial Closing with SAP.” Since then, much has changed in the worlds of accounting and technology that surround the financial close process. The concept of continuous accounting has continued to surface in the market. Earlier this year I wrote a couple of blogs on the subject:
To build on this, I am starting a blog series, with a little help from my colleagues, that will cover the many aspects of the accounting and financial close process. The goal is to help you transform your finance department using the principles of continuous accounting.
From the Ventana Research Continuous Accounting Drives Strategic Transformation white paper:
Continuous accounting integrates people, processes, information, and technology to achieve a transformation of the finance function and its corporate role. Continuous accounting is based on three principles:
- Use technology to distribute departmental workloads continuously across accounting periods.
- Support continuous, end-to-end process management to enhance efficiency and increase data integrity.
- Adopt a continuous improvement approach to overcome inertia and the “we’ve always done it this way” mindset to which finance staffs are particularly prone.
This blog series will break down the steps in the accounting and financial close process into consumable pieces to which you can then apply the three principles above.
The accounting and financial close process is an ever-changing, mandatory process. Some call it “close to disclose,” some call it “record to report” or “R2R,” and some don’t call it anything, but just do it. Organizations with a December 31 year-end close have (hopefully) finished their annual close now, which is the biggest one of them all. As with any process, there were bound to be bumps and hiccups along the way. Now is a perfect time to review how the annual period-end close went and try to identify areas that can be improved.
What can be done better?
There are many dimensions to the financial close, three of which are people, process, and technology. While analyzing areas for improvement, each of these areas needs to be assessed. Do my people have the right skills for the tasks they are doing? Could they be better utilized doing other tasks? Are my processes documented? Are they effective and efficient? Am I leveraging technology to automate tasks and achieve better period-end reporting where possible? All these dimensions are interdependent.
As Bill Gates so eloquently put it, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” The financial close process itself also has many different steps. We have been working with our customers and analysts over the year trying to compartmentalize some of the different steps to make it a bit more consumable, and have developed the following diagram:
Walk through the steps to transformation
Over the coming weeks, my colleagues and I will be writing a series of blogs to walk you through each of the steps below in more detail. We’ll also include suggested ways of improving each, thus transforming your finance department and moving toward continuous accounting.
Our weekly series will cover the following topics:
- Accounting – general ledgers and subledgers, both cloud and on premises
- Accounting – lease administration financial accounting
- Accounting – revenue recognition
- Entity close – intercompany reconciliation
- Entity close – account reconciliation
- Entity close – entity close management
- Corporate close – consolidation
- Reporting and disclosure – analytics
- Reporting and disclosure – disclosure management
- Financial close governance
- Accounting and financial close recap
We hope you enjoy, and we also look forward to hearing your thoughts and experiences in the blog comments or by email.
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