If the product of 2020 has been remote working, the byproduct for virtual finance teams has been an important realisation – traditional accounting practices are long overdue for change.
When many of us worked in an office, a sort of shared experience was witnessing the finance team’s month-end close – complaints about why it would take so long and why the office would be their temporary home due to on-premise accounting systems.
But when Covid-19 hit, that evaporated, fast. It forced us to reflect. The accounting processes most businesses use today are not too dissimilar to those developed hundreds of years ago when the only tools that existed for balancing accounts were a quill pen and paper ledger. Similarly, today’s accounting professionals still spend a large amount of time on repetitive, manual tasks.
But with remote working trends expected to continue well into 2021 and beyond, businesses need faster access to more complete financial data. We need to evolve from the tension of month-end close.
Change isn’t near, it’s here
Closing the books has long been resource intensive. From reviewing transactions to tracking down errors and correcting journal entries to making sure accounts balance, the time and energy required is vast. But there’s a bigger picture. Traditional accounting practices are not only more susceptible to human error, but by the time the process is finished – sometimes weeks after the month has ended – there’s little strategic value left.
Enter Covid-19, which has already pushed many accounting teams to adopt parts of the continuous close (either consciously or unconsciously). Continuous accounting isn’t a technology – it’s a process enabled by automating routine accounting tasks as well as the ones that require complex calculations – like depreciation or amortisation.
Suddenly thrust into working remotely and attempting to deliver real-time views of the business in the midst of crisis in order to pivot, sustain or expand operations, accounting teams have been pushed to automate.
Continuous close and month end
Research shows that 81% of finance professionals rated operating cash flow as the top KPI being regularly updated, demonstrating the critical need to have real-time access to this information in a fast-moving landscape. Compiling large volumes of financial and non-financial information efficiently is no easy feat, and the role of technology in supporting the continuous close approach is essential.
Often, accounting’s difficulty in collaborating with others in the organisation is getting information delivered in a timely manner. Continuous close mitigates this by automating repetitive tasks such as creating journal entries or reconciling account statements, as well as eliminating the need to collect and normalise data from other departments – which can save dozens of hours every month. This automation must be provided by a financial management or ERP system, which should also ensure compliance with accounting standards, government regulations, and tax laws by consistently applying the appropriate rules and schedules for items like revenue recognition, depreciation, lease management, and prepaid and deferred expenses.
Moving from an event-driven close process to continuous accounting provides visibility and accuracy in less than half the time and helps to establish the strategic role of finance. In essence, the role of the team becomes that of an internal auditor, which reviews the automation setup for material errors and testing transactions to keep things in check.
Shift to business now, not ‘business as usual’
Accounting and finance teams must demonstrate the value they can bring to the organisation, and often this comes with a shift in culture. An accountant’s most critical skill is distilling data in a way that matters most to decision-makers to help them meet organisational priorities. It’s one thing to have a great idea, but quite another to be able to use continuous close to deliver financial insights to the business to be able to act swiftly.
It’s human nature to be resistant to change. Yet, this year has shown that we can adapt as quickly as we need to. To help shift the mindset of what accountants can bring in the month-end close process and beyond, they must create a culture of collaboration both within finance teams and other departments to improve processes and allow accounting staff to add more value.
As a result, managers should focus on helping individual team members build and maintain strong relationships. One way to do this is by making sure each person – and the group as a whole – sees how their work contributes to the achievement of broader finance and accounting objectives.
The mindset around a continuous close should not solely focus on doing it faster, but rather designing a process for monitoring critical business information and accessing the data in real-time to deliver both short and long-term business value.
Byline by Thomas Sutter, who is part of Oracle NetSuite’s Finance Centre of Excellence