By Emma Yu, Director, and Toby Hatch, Director - Oracle Cloud EPM Product Marketing
It’s almost here: the end of 2020. Many of us are looking forward to waving this year goodbye. It’s been a tough one on global health, the economy, and many businesses. Yet no matter the circumstances, the end of 2020, like every other year, will bring with it that annual finance ritual: the year-end close.
Many finance teams still end their fiscal years on December 31, leading to frustration, long hours, and missed holiday festivities. In the midst of all this, we often forget how important the period close is to the business. Decision-makers at every level rely on fast, trustworthy numbers to measure outcomes and adjust plans. Now, more than ever, it’s critical to get the right numbers as quickly as possible—because who knows what 2021 will bring?
In today’s uncertain environment, you can’t afford to be slowed down by manual processes and inaccuracies. An automated close that connects stakeholders and systems is critical for getting timely, accurate information into the hands of decision-makers. With that in mind, here are 9 recommendations to move towards an automated close for faster, more accurate results.
Even today, many organizations rely on spreadsheets to manually reconcile their accounts, which can easily number in the tens of thousands; most companies’ accounting staff spend significant time on this process. A purpose-built reconciliation solution can manage all reconciliations, and for higher volumes, match millions of transactions in minutes. With robotic process automation (RPA), financial close applications can speed up processes even more with flexible rules for auto-certifying period-end reconciliations, and matching individual transactions or groups of transactions. This lets your team focus on more complex exceptions that require human judgement.
Complex global organizations have multiple transactions across business units, such as intercompany eliminations, currency translations, and tax transfer pricing. Enterprises must perform these transactions in a way that is both tax-advantaged and compliant with regulations across multiple jurisdictions. A connected, cloud-based enterprise performance management (EPM) solution can optimize these transactions based on business rules to improve tax compliance as well as decrease the time to close.
Allocating expenses across business and functional units is an ongoing process that affects the period close. Legacy ERP and custom-built solutions often bury programmed allocations in the general ledger, making it difficult to understand how they were calculated. A connected cloud EPM solution can streamline the allocation process by calculating complex resource allocations based on interdepartmental relationships and shared resource use, to provide transparency.
Delivering timely and accurate information to both internal and external stakeholders is critical so they can make timely and confident decisions. From internal management reports, to financial statements used for SEC filings and other regulatory requirements, reporting demands (or “the last mile of finance”) often feel relentless. A cloud EPM solution should provide an XBRL creation and mapping tool so that SEC and other regulatory filings can be done faster and accurately. Also, a single, intuitive, cloud-based interface for creating, collaborating and distributing these reports can help keep the reporting process on track. These types of features enable a streamlined approach, so that finance can navigate the last mile without breaking a sweat.
Data should flow freely, but it can’t when different applications and sources use different data structures. Improperly mapped data will cause system errors that could slow any of your period-end close processes to a crawl. An enterprise data management (EDM) solution can help remove these obstacles. A complete EPM solution will provide EDM capabilities so that teams can rationalize master data structures and different business perspectives, all the while facilitating data governance. This enables “one version of the truth” so that everyone agrees on the numbers that are reported.
Finance teams are largely responsible for the period close, placing undue burden on them to collect and process data. Too often, this is still done using spreadsheets sent via email from other departments. A connected cloud EPM uses shared data from ERP or other systems. When teams stay on top of transactions throughout the cycle using an integrated platform, speed and accuracy improve across the board.
In the current environment, “business as usual” is only possible when your EPM solution is cloud-based—as easy to access remotely as it is in the office. Those involved with the close will also work better together with built-in collaboration and workflow tools.
Throughout the years, many organizations relied on customizations to make their on-premises finance systems suit their way of working. These customizations make it nearly impossible to update the software without a long, expensive consulting project, meaning the software only gets updated every 5-10 years. Your business gets locked into processes that become increasingly complex and outmoded. By contrast, companies that transition to cloud-based finance systems benefit from software that’s frequently updated by the cloud provider, with the latest best practices and streamlined processes built in.
Enterprises that have deployed modern solutions such as Oracle Fusion Cloud EPM already benefit from RPA, but they’re also positioned to leverage an exciting new machine learning-based technology: intelligent process automation (IPA), which can recommend new rules to guide automation.
For example, IPA can automate much of the orchestration involved with the financial close and track the status of task completion across multiple systems. It can automatically kick off close processes as soon as dependent tasks are completed and update the close calendar so you can stay on top of where you are in the financial close process. Because it involves many systems, several finance teams, and many lines of business—along with subsidiary companies—many dependencies must be tracked and managed. For example, you can’t close a certain account until all the subsidiaries close all related sub-accounts. IPA will take over much of the work that makes the financial close process so hectic.
As this technology matures, it could automate more and more of the close process, increasing speed and accuracy while freeing up your team for more strategic work that impacts the bottom line.
An automated and connected financial close helps you to quickly generate more accurate and transparent reports for all stakeholders. Companies with an automated close instill confidence in their employees, customers, auditors, and investors. Ultimately, a streamlined process can help finance teams to focus their time on strategic analysis, uncover new opportunities for growth—and miss fewer New Year’s parties.