Is your finance team under enormous stress that leads to burnout? Is there low morale and high turnover? Lately this seems to be the rule rather than the exception. Increasing regulations, poor data integrity, demanding Boards of Directors, and outdated accounting systems and processes all contribute to long lead-times to close and disclose financial data. This is a major cause of the extreme pressure felt by financial departments.
Let’s say, for example, that the close occurs on day 15 and disclosure to “The Street” on Day 21 of the next month. In this case, the finance team becomes “historians” of old financial data by explaining variances, correcting errors, etc. The opportunity to be navigators toward success by quickly making competitive decisions and enacting countermeasures is missed.
Our experiences show that long accounting close cycles are the key factor contributing to this unfortunate state of affairs. Frequently, there is a large variance when comparing lead-time (total duration) to the actual effort time to close the books each month. Some companies have spent over 900 person-hours on their close with departments of roughly 50 people. This means each person contributed only about 2.25 total days of effort… but the closing process took as long as 17 days!
Not all is lost. We can deploy operational excellence optimization processes that can reduce the accounting close to less than a week… and in some cases to one or two days. In addition to accounting close, we can use optimization methodologies that can dramatically reduce the forecasting process lead-time for the FP&A (Financial Planning & Analysis) team.
Compressing lead-time from close to disclose enables financial professionals to transform their roles from “historians” to value-added “navigators” – management team members who successfully navigate toward future success for the business.
Look for our next blog, Financial Close to Disclose: Impact of Delays and Poor Quality, and more information about optimizing your financial processes and our webinars at www.leanhorizons.com.