Closing Software: The Evolution of the Close Why Technology Should Drive Your Close

Transcription

1 Closing Software: The Evolution of the Close Why Technology Should Drive Your Close by Mike Whitmire, CPA

2 TABLE OF CONTENTS AUTHOR: Mike Whitmire, CPA What is Closing Software? 1 Automating Account Reconciliations 2 Shortening the Close 3 Impact on Audit and SOX Compliance 5 The Future of Month-End 6

3 What is Closing Software? Simply put, Closing Software ( CS ) helps accounting departments close the books. CS helps to reduce close time, mitigate errors and streamline financial reporting. Month-end is managed by the Controller, who assigns work to the team and uses an Excel checklist to track completion. They ensure everything is on schedule by getting periodic updates from the team and holding status update meetings to make sure everyone is communicating. Once all of the close tasks have been completed and journal entries have been posted, it s time to ensure supporting documents tie-out to the trial balance. The tieout and reconciliation process can be time consuming, typically requiring somebody to dig through a workbook to find any reconciling items. CS began to gain traction in the early 2010 s and we here at FloQast believe it s the next step in efficient and streamlined accounting. The month-end close is a complex process and has not evolved with technology. If you take a step back and really think about just how much a Controller juggles at month-end, it s amazing that financial statements get put out at all. Our underappreciated Controllers do just what the title suggests: they control everything. Seriously, check out the Essential Functions on this sample Controller s job description. It s a long list of bullets points and the last one sums it up beautifully Any other responsibilities that may be assigned from time to time. Month-end is just a small part of the Controller s responsibilities but eats up a significant portion of their time. The adoption of CS is an exciting time for Controllers as they will have more time to put their talents to use in other areas like strategic planning, process improvement and team morale. CS can help your department in many ways. In this whitepaper we will focus on account reconciliations, shortening the close process and finally how CS helps with audit and SOX compliance. 1

4 Automating Account Reconciliations Accountants are always looking for good ways to save time doing account reconciliations. Performing reconciliations with Excel can be a time consuming process, especially when reviewing thousands of line items. Fortunately, CS offers an alternative to manual reconciliations by integrating directly with your ERP and automating account reconciliations. Here are some areas where CS can help with your account reconciliations: Inconsistent Data Data from source documents and data from ERP s are typically not uniform, which means there is extensive formatting required to perform the reconciliation process. In Excel, vlookups are only helpful to the extent that data between two sources is consistent. Cutting and pasting transactions can be a real hassle, especially if you have a large number of bank transactions and journal entries to compare. However, with CS, transactions and ledger activity are easy to review because of standardized forms and automated balancing features. Efficient Comparison of Transactions Account reconciliations inside of CS applications make it easier to lineup general ledger activity against your source document transactions, enabling you to find reconciling items much faster. Some CS systems even offer intelligent transaction matching, which is able to automatically review thousands of line items and identify reconciling items for your team. Tracking of Historical Reconciling Items Sometimes it s easier to pass on correcting immaterial reconciling items until the next month. However, at some point in the future we ll need to fix this item. Tracking reconciling items is very important, especially if your company has standards for how quickly they need to be corrected. CS tracks this data so you ll always know where the historical reconciling items stand. 2

5 Account reconciliations are vital part of your company s accounting function, making it important to perform them as effectively as possible. Look to CS to help improve accuracy and streamline the account reconciliation process How Can Closing Software Shorten My Close? Every Controller wants to cut days off the close, but how is this really possible without throwing more people at the problem? CS is a powerful tool that will help organize your accounting department s process, ultimately cutting days off your close. Less time closing the books will free up your time to focus your time on being a strategic leader in your organization. Let s take a look at how CS can make your department more efficient: Increased Collaboration One of the biggest problems with the Excel checklist is that it s typically owned by the Controller and the rest of the team does not have access. Every Controller wants to cut days off the close, but how is this really possible without throwing more people at the problem? As a result, close status is often communicated during status update meetings (and we all know how fun those are!). 3

6 CS eliminates these wasted hours by transforming the Excel close checklist into a collaborative tool for the entire team. Once a task has been completed, the reviewer receives an automatic alert to let them know the document is ready for approval. summaries alert the team to what s behind schedule and give a preview of the upcoming tasks for the day. By increasing transparency, team members take more ownership for their role because it s easier to understand exactly how their assigned tasks impact dependencies in the close process. FloQast s Dashboard Actionable Data Understanding historical performance with an Excel checklist is nearly impossible. We LOVE Excel, but it just wasn t built to be a project management tool. CS tracks how long it takes to complete each task in the close process and is able to provide actionable data showing where your team is improving and where they need help. Once armed with this data it s much easier to assign tasks in a manner that will shorten the close and accelerate financial reporting. Streamlined Reviews The review process is slowed down by a lack of centralization the Excel checklist tracks procedure completion, but the documents related to those procedures are saved in a folder somewhere else. One major benefit of CS is the centralization of your processes and supporting documents. By saving supporting documents directly with each accounting process, CS prevents you from having to search through folders to find the file you need. Simple organizational features will guarantee your close will be done consistently month over month. Once you have a system in place, days will start coming off your close. 4

7 Automated Reconciliations We discussed automated account reconciliations earlier, but it s important to reiterate how they can save time in your department and avoid pain come audit time. The reconciliation process is not static, meaning data in spreadsheets and the general ledger can change. By using CS your reconciliations become dynamic and you will be alerted if your trial balance and your source documents no longer tie-out. It s always better to get this news from a great piece of software than the auditors. By eliminating any possible discrepancies in real time you will save countless hours on the back end. With the help of CS, a small investment of time upfront will pay major dividends on your team s average close time. Everyone wants to cut days off their close and with CS that becomes a reality. Impact on Your Audit and SOX Compliance In addition to streamlining monthend, CS provides some incredible benefits during audit season. Audit Support Who doesn t love a good PBC request list? Okay, nobody really. The audit request process can be time consuming, especially for departments that aren t the most organized. First, you have to take time away from your actual job to get documents organized and sent over. Then, whenever a question comes up about some one-off transaction that happened six months ago, somebody from the team has to drop everything and try to answer it. If you are organized, the auditor s request list should be manageable. But, do you save all your support on a shared drive? Bury your comments in spreadsheets? Sign physical copies of journal entries and store them in filing cabinets? 5

8 These are a few very common habits that can add hours to the audit. The good news is CS will make your audit (and your life) much easier. CS organizes audit documentation and facilitates communication with the auditors. Less time spent on your audit means reduced audit fees and more time for your staff to focus on closing the books and preparing the 10-K. SOX Compliance If you re fortunate enough to be a publicly traded Company, part of every audit is the testing of your internal controls. Proper documentation of your policies and procedures plus segregation of duties in preparation and review is essential for minimizing audit risk on the way to an unqualified opinion. Messrs. Sarbanes & Oxley CS will help your accounting department document your processes, internal controls and sign off dates. Auditors will request you to walkthrough your accounting function and with CS it is easy to facilitate these walkthroughs and show historical data to support your internal controls. Why Closing Software is the Future of Month-end As technology and business progress, new Enterprise software applications are built to help address pain points and inefficiencies. In the accounting world, there was a clear problem of managing data and producing accurate financial statements, so we developed general ledger software. CS is the next evolution in the accounting software space. Not only do accountants want to produce an accurate financial picture, they also care about doing this efficiently with the entire department collaborating. As departments grow, roles become more and more specialized. 6

9 It is great to have a person with a vast understanding of a specific accounting function but the tradeoff is a lack in understanding of the big picture. CS helps the entire team be on the same page and understand how their role contributes to the greater cause. Technology has had a major impact on the accounting close process and will have a growing role in the future of month-end. The workforce today is dominated by the Millennial generation, which tends to be very good at adopting and applying technology. By using CS, CFOs and Controllers will have the transparency necessary to run their department and Millennials will have the technology needed to do their job efficiently. Increasingly, accountants are being called upon to be involved in business decision making. The oversight provided by CS, will give CFOs and Controllers the freedom needed to be a strategic partner in the business instead of just crunching numbers. Over time, general ledger software has advanced to help with many facets of the accounting function, but for the most part has neglected the project management aspect of the monthly close. CS will bridge that gap for management and finally provide a tool that puts the close process at the forefront. CS will make your life easier, improve close time and turn good accountants into Superheroes! 7

10 About the author: Mike Whitmire, CPA CEO & Co-founder FloQast, Inc. Mike Whitmire is the founder and CEO of FloQast. In addition to strategy, sales and operations, Mike has led FloQast's product development since inception. His vision helped create one of the first accounting workflow management platforms in the market. Prior to founding the company, Mike worked as an auditor at Ernst & Young and an accountant and consultant at Cornerstone OnDemand. Mike has a BS from the Whitman School of Management at Syracuse University, is a CPA and an AICPA educational speaker. FloQast was built out of frustrations experienced first-hand in outdated accounting departments. Closing the books is manual, unpredictable and prone to expensive errors. FloQast is the fastest, most accurate way to close your books. Learn more at