By Margaret Harrist, Director of Content Strategy and Implementation, Oracle
Oracle is making progress toward its goal of an automated close of its monthly financial books—and in March, with the finance team working from home because of COVID-19, the company shortened that close by 20%.
“We had been planning to reduce the close time frame, but to be able to accomplish that while working remotely is incredible,” says Maria Smith, Oracle senior vice president and assistant corporate controller. “It was business as usual for us on the cloud.”
A faster close enables company leaders to respond more rapidly to changing business and economic conditions, and it gives the finance team more time to focus on strategic activities. Ultimately, a fully automated close would result in real-time financial accounts, and financial data could be reported at any time.
The path to that fully automated close goal is being paved by one of Oracle’s subsidiaries, which itself has more than 20 subsidiaries located in all major regions. That company closed its books in a single day for the first time in March—also while working from home—and is serving as Oracle’s “pilot test case” for moving finance systems to the cloud before rolling out the various ERP modules and business processes to the entire organization.
Among the benefits that Oracle is seeing since starting implementation of its Cloud ERP: About 92% of global bank transactions are now automatically reconciled; global intercompany balances across hundreds of legal entities are reconciled in 90 minutes; expense allocations have been reduced by 98%; accounting for open purchase order accruals globally is now complete in just three hours; and so far, the company has reduced its manual accounting by 35% with multi-ledger, multi-currency journals.
But this scale of improvement is as much a testament to the way that finance and accounting professionals work today as it is about technology.
“You don't automate a close by sitting in the back office with the Financial Times under your arm; those archaic images of accountants are gone forever,” Smith says. “Core competencies for accountants today are about building relationships, influence, innovation, change leadership, collaboration, and leading companies into a modern finance world. It’s a completely different role than it used to be.” (Smith talks in depth about the automated close in a May 13 Zoom event.)
Critical Steps Toward a Faster Close
A necessary foundation for getting to an automated close is integrated systems that are always in sync and are based on a single set of data, which eliminates duplication and the need for manually-intensive reconciliation, Smith says.
“When you have one set of data, you don’t have to spend time on reconciliations because everything ties out immediately,” she says. “I know companies that have to reconcile every subsection of their activity to their general ledger. They can waste days doing that, while ours is all automated.”
For example, one of the biggest cost areas for companies is people. The integration of Oracle Cloud HCM and Oracle Cloud ERP means that when Oracle acquires a company and the employee data is moved into the HCM system, it is immediately integrated with the ERP system—the salary and benefits, cost centers, the line of business of each employee, purchase orders, travel expenses—all of it flows in automatically.
“Knowing what your headcount is globally in a company our size, and never having to try and reconcile it between accounting and what's in HR is a huge time saving,” Smith says. ”An integrated HCM and ERP cloud results in data accuracy, control, and speed. That alignment is also key when a company restructures, acquires new companies, or changes its go-to-market model, shifting some employees to new business lines or cost centers.”
She equates the close to a relay race: When the data and systems are integrated, it is like the baton is transferred immediately. If the systems do not talk to each other and are not integrated, then the “runners” have to stop, reconcile, and research before handing over the baton for each area—accounts payable, fixed assets, revenue, expenses, and more.
Another important factor: Oracle moved to a single global chart of accounts, which provides consistency across the company and greatly simplifies reporting. Today, Smith says, her team are empowered with up-to-the-minute data because they can run real-time SmartView reports for the company overall, for any of the company’s hundreds of legal entities, or for lines of business or regions.
Among the biggest lessons she learned in the process of moving Oracle’s finance to the cloud were that the move to a global chart of accounts should have happened sooner, and that finance leaders need to set the bar high.
“When we set the goal to achieve a one-day close, there was initial disbelief,” she says. “That changed quickly to a motivating challenge, and the teams started to research what it would take to make this happen. That unleashed hundreds of innovation ideas, from simplifying processes, to automation, to fully embracing the challenge. The reality is no accountant wants to spend days and weeks closing the books if they can do it in a day—and especially if they can then focus on the next goal of a continuous automated close and designing the next generation of finance.”
Accounting’s New Role
Meeting the goal of a one-day close involves much more than a company’s accounting team; it requires collaboration with all the lines of business in the company to modernize business processes, identify areas that need improvement, and enhance the quality of data.
Accurate accounting requires accurate data—and accurate data is vital for speeding the close.
“One of the biggest learnings for us was that while a one-day close seemed initially to be about speed, the decisions we made to achieve that speed were really about efficiency,” Smith says. “And we learned that it was not just about efficiency in finance, but efficiency across the entire company. That has made this quest a win for finance as well as for the business.”
Another key focus for her team is partnering arm-in-arm with product development to help drive enhancements in future quarterly updates of Oracle’s cloud applications.
“Product development shadowed my team during the close process at quarter end’, Smith says. “They observed everything and as a result, we now have a list of additional areas that we plan to automate. It’s a wonderful partnership and a completely new way of working.”
Because they are daily users of Oracle Cloud ERP and have such insight into the system, Smith’s team has also taken on more of a front-office role—working with customers, sales, marketing, and other groups—to become an external face of the company.
“We are one of our own biggest customers,” she says. “When finance leaders want to understand Oracle’s ERP offering, they want to talk to the people who actually use the product and close the books. So my team often talks with our finance peers at other companies about our experience in implementing and using Oracle Cloud ERP.”
It’s all added up to big changes for Smith’s team—and they’ve embraced their new role as innovators.
“I think the job of accountant in this environment is one of the most fascinating ones you can have in a company,” Smith says. “Every day I hear my team sharing more and more ideas about how we can reach goals we would not have thought were possible just a few years ago—like an automated close. It’s exciting because it’s all now possible—and it’s up to us as leaders to go for it.”
Originally published in Forbes Oracle BrandVoice.