Blog
Mar 16

Finance and Period Close Automation

Many businesses are focusing their digital transformation efforts on four main areas*.

  • Starting with products and services. Where they are aiming to bring new offerings to market, driving up competition and gaining revenue and market share.
  • Secondly, driving deeper customer engagement through multiple digital interaction channels.
  • Thirdly, employee development, to embrace and develop within the new digital landscape.
  • Finally, optimising operational processes, digitising processes and way of working.

How many organisations however, are looking at their finance functions to see where digitisation can benefit the business?

After all, providing financial results across the organisation; has probably improved operational reporting to better manage the business, especially with the digital agenda of the company. Right?

So let us take one of the most fundamental of all finance processes – Period Close. (We are using period close, as some organisations do not run their finance schedule based on months. Some run it on 4 week lots, hence, using period.)

Period-close is the most basic finance process performed. It involves closing all transactional systems, the formal posting of each period’s transactions to a summarised reportable set of information for use by management and potentially to external users (i.e. investors, partners, etc). There is little perceived positive benefit to the bottom line or to the organisation as a whole but considerable amount of risk in taking too long or getting it wrong.

The focus of the finance teams is, the consolidation into a common set of data and reporting, the financial results, so that the business can review, reflect and ultimately act.

Period Close Challenge

At a high level, the two broad process elements are:

  1. Temporarily ‘closing’ the finance ledgers (i.e. ERP enterprise resource planning software) so that a snapshot of the current balance sheets can be generated. 
  1. Consolidating the various outputs into a unified set of financial statements that can be used for analysis of the current business performance and periodic results.

The challenge for finance teams is being able to ‘close the books’ as close as possible to period end; so that the data captured is a ‘reasonable’ proxy for the current status (profit, loss, revenues, costs, margins, etc) to be meaningful to the business. This means that the window to complete the second part of the process, consolidation, needs to be completed in a short a time frame as possible. This normally involves, loads of manual effort, late nights, headaches and frustration in the finance teams, especially, if the period is quarter end or year end!

Let’s build up a conceptual example company.

They have both Oracle Financials, as well as SAP Financials. In addition, they have separate general ledgers in different businesses, running on different platforms (part of the legacy of previous acquisitions).

Add in a time sheeting solution that captures their professional services teams as they engage on projects – either billed directly and monthly back to clients, or cross charged to existing contracts.

Add in their product business, where they have hundreds of products, sold either directly via their web based portal, or via partner companies. Sales, invoices, cross charges, discounts, bulk purchases, reorders and returns. Everything has to be captured.

Their process and working practices mean that they close the books before period close, around day 26 of the month and do not reopen them till around day 3 of the following month. For a 30 day month, that is 7 days spent on closing and consolidating the books.

As their systems, processes and close activities are so complex; they have a Finance Operations team to manage this, month in, month out. Often with overtime and sickness by the staff. They have developed a set of manual processes; with extracts; uploads; downloads; data transfers; cross checks; data merges; you name it, it happens.

Sound familiar?

Period Close Automation

This is where Period Close Workload Orchestration and Automation comes into its own. By putting in place such a solution ensures all of the steps involved in delivering financial period close happens in the correct sequence and at the correct time.

  • You automate the mundane.
  • You take the processes and map them out.
  • Add in the connections to the different ERP solutions and data extracts that they provide.

Once you have this, you can then work though the essential data management actions

  • Merges
  • Additions
  • Deletions

Then

  • Test
  • Check
  • Verify

and voila, the close process is automated.

Putting this in place frees up the finance teams to deliver what they want to deliver – supporting, guiding and helping the business to understand the business results.

A win-win all round.

Here at MDB-Service Consulting, we support clients, to optimise their financial processes – more than just period end – but a raft of finance focused services; developing and enhancing finance automation and orchestration solutions that deliver real business value.

If you are struggling to manage key finance processes and be able to automate them, get in touch to see where we can help you be successful in your automation future.

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