Have you been trying to speed up the monthly close and reporting process but never quite make it happen? Daston can help you shorten your financial close to five days or less by embracing automation.
Here are just some of steps in the close process that are prime candidates for eliminating manual processes:
- Identifying transactions: Accounting automation identifies all required data for the close already stored and verified in a centralized system. Sources such as vendor billing details, bank statements, employee expense reports, and other documents are analyzed to determine if the transaction exists and whether it is relevant to the business. This should happen without human intervention.
- Entering transactions into a journal: This process should be automated so financial activity is recorded as it happens.
- Posting transactions to the general ledger: When transactions sync to the general ledger immediately through automation, finance teams are closer to being able to perform soft closes on demand at any time. Amortization and depreciation schedules, P&L allocations, and other routine calculations can automatically operate against stored data, reducing work at the end of the month.
- Reconciling bank accounts: A study from Ventana Research shows that 72% of companies that automate most or all their reconciliations finish in under six days compared to the 25% where just some or none of that work is automated. For companies with several bank accounts, reconciliations can become more efficient through rules-based automation that automatically matches statements to records and flags any anomalies.
- Creating adjusting journal entries: In addition to correcting errors, accounting may also need to create adjusting entries to record deferrals, accruals, and non-cash expenses such as depreciation. Automation can create schedules for deferred revenues, loans, fixed assets, and other recurring items to eliminate the need to calculate these manually.
- Preparing financial statements: Accounting automation will then curate and generate financial statements. Often, these automation tools will have the capability to deliver custom reports to meet the requirements of different stakeholders.
In addition to the basic steps in the close, automation can assist with some of the more complex components of the financial close, including:
- Intercompany eliminations: As a part of the close process, an automation system will evaluate activity in intercompany accounts and create the journal entries to eliminate artificial profit and loss.
- Financial consolidation: For companies with subsidiaries, an automation solution will post and consolidate subsidiary-level accounts, saving time and improving compliance with accounting standards and reporting requirements.
- Revenue recognition: Revenue recognition standards are complex and unique to each organization. Daston’s software, however, can manage these requirements. Various studies conclude that just automating revenue recognition can shorten the close to 80%.
- Currency translation: Transactions entered by business units using a foreign currency can be automatically converted and posted to the general ledger using the appropriate currency and current exchange rate.
- Variance analysis: Immediate automated variance analysis allows a business to take action even while the reconciliation and close activities are still in progress, rather than waiting on the sidelines for period end numbers to roll out.
Where to Begin Automating
Unsure where to start in the automation journey? First, break down the close and identify which foundational areas — like accounts receivable, accounts payable, and the general ledger — are resulting in the most errors or taking up the most time. Tackle automating the tasks that build into that area first to get the most bang for your buck.
Next, standardize and document virtual workflows. For most companies, the closing methodology has been developed over time, resulting in a mix of discordant processes. Leveraging technology to improve a flawed process is a common mistake organizations make. Before applying technology to speed up the close, review the process already in place to create standardized workflows that can be conducted remotely to reduce risk, time spent, and complexity.
Using standardized workflows to guide process execution helps because it ensures that all necessary steps are performed, all phases are executed consistently across an organization, and the hand-offs between those doing the work are coordinated.
Creating standardized virtual workflows involves first creating a virtual “close command center” staffed with the people who organize and oversee the activities involved in executing a remote close. They will also work with the IT help desk to address any technical issues that might arise and ensure compliance standards are met. They will then:
- Determine processes in the financial close that need to be standardized.
- Identify process configurations currently in use and brainstorm opportunities to unify different process configurations.
- Map out the close process step-by-step — visual tools, including flowcharts, are helpful.
- Invite finance and accounting team members to review the process map and make edits where needed. Bring in IT and other stakeholders where applicable. More input at this stage is better than too little.
- Document the decided workflow in a virtual close playbook. Describe each step in the process, delineate a detailed schedule, and state who is responsible for completing the work. This will serve as a day-to-day guide for the command center, help analyze and resolve accounting resource conflicts, and identify any significant capacity constraints.
- Upload the playbook to a platform where everyone can access it at any time or place — ideally in the cloud. If key team members are out, or if new employees need training, the process description can keep things moving. You might also develop a more concise checklist at this point. Not only does workflow standardization provide a clear framework for the close, but the activity itself can reveal challenges and opportunities for improvement in each process. It may also identify processes that are outdated or no longer needed for the close.
Once this process is standardized and well-documented, companies with the appropriate technology can then automate workflows. Workflow automation provides the checklists, roles, rules, and processes for review, reconciliation, approval, or rejection. These are defined once and then repeated.
How Daston Enables a Faster Close
Daston delivers a complete DCAA-compliant financial management solution with the capabilities needed to significantly shorten the month-end process, including supporting a continuous close.
Benefits Daston provides to shorten the financial close cycle include:
- Automation of integral day-to-day business processes, such as accounts receivable and accounts payable.
- Automation of a wide range of repetitive tasks, including journal entries, transaction matching, bank reconciliation, intercompany transactions elimination, revenue recognition, and more.
- Transaction matching.
- Embedded controls, support for U.S. and international accounting standards, and financial consolidation capabilities to help maintain compliance with complex rules and regulations.
- Automatically distributed financial statements to internal and external stakeholders, with custom reporting formats to meet the needs of different audiences.
- A cloud architecture so accounting staff have secure access to needed information anywhere, anytime, as well as visibility across departments.
Especially in today’s business environment where efficiency is key, organizations need their finance teams focused on high-value tasks — not time-consuming manual close processes. Ready to take your financial close to the next level? Daston can help! Contact us at (703) 288-3200for a free consultation today!