Finance organizations are always looking for ways to speed up the monthly accounting closing to provide internal/external customers with timely insightful information. Although ERP systems and add-on software can help streamline the accounting process, experience has shown it is not enough in most instances.
Any process has an input, a process, and an output. In the case of finance, it looks as follows:
The input may come from other ERP modules (i.e. sales, payroll, supply chain, etc.) or reports/spreadsheets from other departments, in case of a manual process. This information is processed by finance to be able to issue reports and insights to internal/external customers.
For finance to perform at its best, data requirements have to be clearly agreed and documented to ensure all data providers understand what it is required and take ownership. Furthermore, monthly metrics are required to monitor the efficiency of the relationship between both parties.
In reality, few finance organizations can attest all inputs are accurate and received timely. This is one of the reasons, the closing process takes more time. In many companies, data providers do not fully understand how they can influence, in a positive or negative way, the monthly accounting closing.
To create more awareness and accountability among all data providers, finance needs to take the lead and set up a cross-functional project aimed at: (1) educating data suppliers on their influence on the accounting closing, (2) explaining the current challenges faced by finance while receiving data, (3) developing together a document outlining what each data provider needs to do, by when and how.
While assessing the current challenges, finance-led workshops are needed to cover the following topics, at a minimum:
Quality of current inputs
To which degree inputs are rejected by finance because they do not meet quality standards?
To which degree inputs are returned by finance to upstream processes or data providers?
Quantity of current inputs
To which extend the data supplier is not producing the inputs required?
To which extend the data supplier can scale up/down quickly due to changes in the number of inputs required?
Timeliness of inputs
To which extend the required inputs are not received by Finance when needed?
To which extend inputs arrive in batches and must be put on hold until needed?
To which extend inputs arrive without warning creating bottlenecks in finance?
Flow of inputs
To which extend inputs finance receive inputs that are not needed.
Appropriateness of input
To which extend the input is structured in a way that is not convenient for finance?
If the preceding questions are properly discussed and agreements are made between the data providers and finance, I cannot say this will resolve all challenges but it would clearly be a good step in the right direction.
For this type initiative to yield good results, finance needs to secure support from senior management. Everybody needs to be convinced that good data results in better outputs; this is critical for senior management to make better decisions.
Any new process needs metrics to monitor it is working as intended. In our case, we do not need many. Some would be needed to measure timeliness (i.e. were all unpaid invoices received by Finance by the end of the month?), accuracy (i.e. does payroll include all deductions?) and reporting (i.e. was the report received from purchasing submitted using the agreed-upon format?). These metrics would need to be reviewed monthly to assess if corrective measures need to be implemented.
Note on the Author: Eduardo Chavez is a finance professional with experience working globally. He is known for: (1) running best-in-class finance organizations, (2) position them as true business partners and (3) leading strategic projects aimed at reducing overhead up to 30% and improving performance. He can be reached at email@example.com