12 Apr, 2022

Top Signs Your Financial Close Process Is Broken

Financial close is a much-dreaded activity for accountants across any organization. Balancing accounts and closing the books towards the end of a reporting period involves bill payments, invoice reviews, and posting adjustments.  

Importantly, these tasks are to be completed with utmost precision in an error-free manner to build monthly, quarterly, or yearly reports. Accounting departments face these challenges and fail if not provided with an efficient tool to manage.  

Is your Financial Close broken? 

Here are the top 5 signs of a broken financial close: 

Zero documentation: Organizations with a winning streak usually have a well-defined roadmap of steps and processes to be performed in a time-bound manner. If your organization lacks a sound structure, there is a high possibility that your performance will be impacted too. 

Organizations that run without solid documentation of the financial close are likely to encounter a series of challenges in the long run. This may be due to a lack of resources or a management decision to not assign a dedicated resource for documentation.  

Absence of automation: Accounting is a manual process since its very beginning, and the process was error-ridden for a long time, but with the onset of advanced computational tools, the accounting software is capable of performing all the complex tasks in an error-free manner reducing both workload and time for accountants.  

But even in the 21st century, several organizations rely on manual effort to close their books, leading to prolonged time consumption and errors. The lack of automation heavily impacts organizations as delayed reports can lead to poor decision-making.  

Confidence in spreadsheets: The benefits of spreadsheets are limited and cannot be used as an alternative to an accounting solution. Organizations face a huge disadvantage when they utilize spreadsheets to run routine tasks like amortization, revenue tracking, and depreciation and later add these details at the time of financial close leading to unwanted time delays and risks.  

Relying on spreadsheets may lead to critical data errors as they can easily be modified if shared. Handling these accounting errors is complicated as accountants will be unable to track the modified area or modifier or its time frame.  

Distributed data: The accounting team collects data from multiple sources within the organization including sales teams, operations, or project management to prepare customer invoices. They need to be constantly in the loop to approve or plan for upcoming expenses or track the current payment status for the balance sheet. Without the constant flow of data, accountants end up wasting valuable time leading to major time delays in closing.  

A centralized data center can remedy the situation but organizations often rely on multiple applications (CRM or project management systems) and compiling data from these disparate applications and uploading it to the general ledger is a difficult setup. This is even more complex if the company has multiple subsidiaries and they each have their own set of stand-alone applications. Migrating data from one system to another also increases the chance of errors and requires the assistance of a technical expert.  

Lack of control: Companies without proper control over their processes are likely to have a broken financial close. This will lead to compliance issues; companies must adhere to accounting standards to ensure good governance as well as to eliminate internal fraud. When companies have a predefined structure for approvals and purchase requests it will help account managers to standardize the process and create financial statements with integrity.  

How can Oracle NetSuite help? 

Oracle NetSuite is a leading cloud solutions provider with a presence across 20+ industries. Easily automate your financial close process with NetSuite software and put an end to reliance on spreadsheets. NetSuite helps accountants with a series of complex processes like revenue recognition, depreciation, and amortization leaving no room for error.  

NetSuite’s governance, risk, and compliance capabilities help companies achieve their risk management objectives with built-in processes and automated controls designed to address the increasing complexity of regulatory, operational, and industry requirements. 

NetSuite acts as a single source of data from which you can manage and access all areas of your business, including accounting, sales, and shipping. This eliminates the challenges that accountants face while compiling data from different sources as NetSuite easily collects data from all departments without delays or errors. NetSuite thus ensures a smooth closing and helps organizations make better decisions  

Planning to implement NetSuite to handle your finances? Connect with our NetSuite certified experts at Jobin & Jismi and make it happen.