In a recently published Q&A on Forbes.com, I discussed how emerging technologies such as automation and robotics are helping CFOs and accounting teams spend less time on the financial close and more time on driving added value including being a strategic advisor to the business. I call this movement The Smart Close.
Skewed Prioritization During the Close
A typical financial close is divided into two parts: Record to Report (R2R) and Report to Analyze (R2A). The problem is that many enterprise financial leaders view the first part as the main event, and channel the majority of their time and expertise into R2R.
While it is vital for businesses to have efficient and cost-effective R2R functions, finishing the close is when the real work begins in the R2A process. And when accounting leaders funnel most of their resources and most of their time into R2R, that comes at the expense of R2A.
From a broader business perspective, I see this myopic approach all too often. Companies want business growth, improved margins, greater cash flow, better controls, and satisfied customers and employees. As accountants, we need to look beyond closing the books and focus much more on how we turn financial information and other market data into insight and action that can help achieve these goals. The close is not the end point, but just one step in the achieving the real goals.
A Holistic Approach to FP&A
Firms that are embracing the Smart Close recognize that Financial Planning and Analysis (FP&A) is something the entire finance team should be involved in, not just their FP&A team.
Accounting managers and their teams work alongside other line-of-business leaders to analyze financial data, draw actionable insights, and support the business leaders toward achieving the larger company goals. By helming a comprehensive R2A process, finance and accounting teams can help identify areas of focus and opportunities for growth across the entire business, pursuing strategic changes driven by financial and non-financial data.
Once CFOs embrace this shift in thinking, how does he or she align people, processes and technology to spend less time and money on the close to free up time for analysis? A common mistake that many CFOs make is believing that technology such as automation and robotics is “the” solution. Robotics is important, but only one tool in a larger kit available to CFOs.
CFOs need to use all the tools and levers at their disposal, starting first by determining what they can eliminate, followed by what can be optimized before applying automation and robotics. By jumping straight to robotics, you run the risk of magnifying what already is a bad process. This is a key element in the SMART close and we call it the EOAR approach:
- Automate what you can within your existing systems
- Robotics can be leveraged to extract the last remaining efficiencies
The gains achieved by taking this EOAR approach far exceeds the gains companies make just by looking at robotics as a solution. In some clients for example, we’ve achieved more than 25 percent journal elimination, up to 90 percent reduction in time spent on intercompany reconciliation, and 70 percent reduction in time spent on closing and reporting. All that freed up time and talent can now be put to driving analytics in support of the broader business goals.