Financial Food for Thought: Setting the Table for a Successful Year-End Close

As 2016 comes to an end and the books close on December 31, accountants and financial analysts know what’s on the menu first for 2017: the annual year-end closing period and audit. Whether your company is public or private, the year-end closing process can be stressful, lengthy and downright messy, especially if the wrong information systems are at the table.

Financial year-end closes are a lot like the month-end ones,  except with an extra helping of data, reports, and reconciliations. Layered on top of this is additional audit scrutiny. As regulations to combat book-cooking continue to grow, auditors have an appetite for more and more reports and documentation, leading to more work for finance and accounting teams. Here, we’ll look at some of the challenges in―and solutions for―the right meal to satisfy corporate and audit reporting needs.

ERP Systems Serve up Stress

In a 2013 survey and presentation on financial closing best practices from the Institute of Finance & Management (IOFM), “systems limitations” was the most common challenge to financial closing, mentioned by about half the 100 controllers surveyed. Not surprisingly, then, investing in “robust IT solutions” was the second highest priority for these controllers in improving their financial closing process.

The IOFM honed in on two overlapping strategies at companies with fast monthly, quarterly and annual accounting closes: 1) investment in robust IT systems, like those for enterprise resource planning (ERP), and 2) implementation of best practices, like eliminating manual data entry. Unfortunately, in a real-world environment, these two financial closing strategies can be at odds.

For example, getting the ever-critical trial balance report from an Oracle ERP system into a digestible format introduces a manual process. After submitting the report in Oracle, you either print it out and manually enter it in Microsoft Excel for formatting or save it as a text file, export it to Excel, and then execute a text-to-column conversion. The process is tedious and time consuming, especially for a gigantic year-end trial balance report, which may need updating two to four times per day for three months or more until the books are adjusted and finalized.

A Data Coma with Audit Aches

Another challenge related to the trial balance report described here is that it comes out with static ERP data. This becomes a real issue when the auditors want to dig into sub ledger and journal details, like scanned invoices, behind the numbers on the Excel spreadsheet, especially with the volumes of data in a year-end report. With each request for information, the finance and accounting team must repeat the process of running an Oracle report for the requested information and exporting it to Excel.

Auditors will also want make sure that accounts in the general ledger correctly reconcile with Accounts Payable and other modules. This involves manually pulling and combining data from multiple sources within the ERP system in an Excel spreadsheet,  a process that is, once again, very prone to error.

Dishing up an Automated Dessert

 IOFM recommends these three steps as a simple road map for improving financial closes:

  1. Implement automation: Many companies depend on Excel, even if they’ve moved their finance and accounting process to an ERP system. Easy collaboration, review, and visibility to closing results in these spreadsheets are critical.
  2. Include people: Data owners can respond to queries and make corrections, but first define duties and system access, and then make sure to communicate.
  3. Develop closing schedules: A closing schedule for all organizational levels makes sure each department understands its role in the process.

To automate reporting processes in Excel so results are easily visible for finance teams and auditors alike, Excel add-on reporting tools interface directly to real-time ERP data. A year-end trial balance report created with this tool works from one single source of truth―the ERP system―providing centralized version control and immediate drill down to those critical sub ledger details that auditors crave. Because these tools contain third-party code, their Get Balance and Run Report functions can’t be modified, which can be demonstrated for auditors.

In the reconciliation process, Excel add-ons can immediately pull and consolidate data from multiple modules in the ERP system into one spreadsheet. As with trial balance and other reports, these reports can be refreshed or drilled into with one click, instead of an hours-long process.

The IOFM said 36 percent of controllers felt reducing spreadsheets was a priority for their financial closing process. Yet, spreadsheets remain a reality when standard ERP reporting falls short. Excel add-ons bring to the table a viable alternative for automating year-end reporting processes, while centralizing spreadsheet use.