Streamline the Financial Close

INDUSTRY OUTLOOK
APRIL 2013
Streamline the
Financial Close
Businesses turn to corporate performance management suites to speed the
financial close while supporting both cost optimization and growth objectives.
T
he chief financial officer (CFO) and his or her staff are under constant
pressure, especially when it comes to the financial close, the process of completing an accounting cycle and creating financial statements for company
records and external legal reporting. As an article in the Journal of Accountancy points out,
“regardless of company size or complexity, all successful financial close processes require
continuous communication, comprehensive documentation, and a flexible, responsive
organization.”1 Bringing these elements together can be difficult, though, even for the most
experienced finance professionals.
CFOs and others in the financial department are being challenged on all three
fronts — input, output and processes. One of the main input problems is that the financial close is typically thought of as a process that stands alone instead of something
that’s part of the overall corporate performance management (CPM) process. This leads
to fragmentation of the close and confusion as to what is required from each of the
individual departments. One financial group may view the close one way, while another
sees it quite differently. In addition, every finance department is being pressed to meet
an ever-growing set of regulatory compliance mandates, while most are still using
rudimentary software that makes it difficult to control and share data.
This absence of a solid financial system — or processing — that can handle disparate
data and processes and store that information to speed compliance and reporting creates additional pressures during the close. Relying on spreadsheets to create financial
filings for internal and external stakeholders such as the U.S. Securities and Exchange
Commission leaves much to be desired. Data quality is often subpar, and it is not unusual
to see errors introduced during the normalization process.
This has become a larger problem over the past few years as the amount of data required
during the close has increased, especially for organizations with a multinational presence
that requires additional reporting. The end result: The typical monthly close can take as
long as 21 days. A longer close means data is not always readily available during crucial
planning and forecasting. It can also affect output or what is more commonly thought of
as a company’s financial standing if data or reports are delayed or overdue. Plus, there are
the added personnel costs associated with an extended close. Finally, it can be difficult to
defend practices and data during an audit since there is no audit trail to check.
However, the use of data is changing this paradigm, according to the report, “The
Data Directive,” Economist Intelligence Unit survey, 2013, commissioned by Wipro
Technologies.2 The report found that improvement in financial close management
1. Kevin Kelso, "Building Blocks of a Successful Financial Close Process," Journal of Accountancy, December 2011,
http://www.journalofaccountancy.com/Issues/2011/Dec/20114327.htm
2. "The Data Directive: How data is driving corporate strategy — and what still lies ahead," Economist intelligence
unit survey, 2013, commissioned by Wipro
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APRIL 2013
“Rather than wait until
the end of the month
when you close your
books to look at data
cells and make changes
that are required, CFOs
can keep track of KPIs
and reports and make
necessary changes
while the close is still
occurring.”
was rated among the top two process areas for which CFOs say data creates a clear
— Rajesh Krishnaswamy,
General Manager and
Global Head – Banking,
Analytics & Information
Services, Wipro Technologies
disparate and far-flung systems. Once in place, these consolidated solutions, accord-
positive difference.
SIMPLIFYING SYSTEMS AND PROCESSES
The fact that data creates such a difference during the financial close is one of the main
reasons companies are starting to invest in technologies and services that address
these issues.
Corporate financial management suites are one option in the growing arsenal of tools
designed to speed the financial close while supporting cost optimization and growth
initiatives in an organization. Organizations are also benefiting from consolidation of
ing to Gartner’s 2012 report, “Magic Quadrant for Corporate Performance Management
Suites,”4 handle:
• Budgeting, planning and forecasting
• Profitability modeling and optimization
• Strategy management
• Financial consolidation and close
• Financial and management reporting and disclosure
The benefits of automating the financial close are many. As Gartner’s Magic Quadrant
for CPM Suites explains, this type of application “lets organizations reconcile, consolidate, summarize and aggregate financial data based on different accounting standards
and government regulations. New functionality for financial close and reconciliations
management is being provided by CPM vendors as they expand their financial governance capabilities. These applications require complex transaction-processing rules
to automate intercompany transaction management (elimination and matching),
and must maintain a detailed audit trail of all transactions processed to arrive at the
consolidated financial results.”5
“There can be better standardization and more consistency in data once everything goes
through a single point-of-entry solution,” says Rajesh Krishnaswamy, General Manager
and Global Head – Banking, Analytics & Information Services, Wipro Technologies. “The
more disparate the company is, the harder it is to achieve control and achieve eidetic
consistency of the quality of data,” he says. “In that respect, a classic example would be
the chart of accounts, where you typically can’t find consistent definitions.”
Indeed, one of the most important things an automated financial close application brings is the ability to consolidate data into a single place, such as bringing
together disparate systems and repositories. Data associated with this process includes
balance sheet and income statement accounts such as assets, liabilities, operating
3. Ibid.
4. "Magic Quadrant for Corporate Performance Management Suites," Analysts: John E. Van Decker, Neil Chandler,
Christopher Iervolino, Gartner, Inc., March 19, 2012, ID:G00219353
5. Ibid.
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APRIL 2013
Closing in on
the Close
There are two scenarios that bring
organizations to Wipro for help. The
first is the need to recoup time from
the close. An organization may be
producing good-quality reports and
meeting compliance rules, but it is
wasting too much time on the process
and execution of the close. Many
businesses require so much manual
intervention that staffers are simply
overwhelmed and overworked.
expenses, and nonoperating revenues and gains, among others. These categories are
subcategorized by business function, company division or product line.
Assembled manually, this data can be inconsistent since it is often collected
from multiple departments and sources — electronic, paper, financial and nonfinancial.
It is then assembled into a single, common chart of accounts that meet a wide variety of accounting standards, depending on the company, its origin, and whether it is
public or private. When data is in a central repository, anyone in finance can easily do
ad hoc analysis and create reports, especially if the financial software is tied to a strong
business intelligence platform.
Automation also makes even the most time-consuming tasks easier or unnecessary. For example, using the software, organizations can instantly perform currency
translation, which helps speed the close as well as the execution of other key financial
reports. This is crucial for companies that are global or have plans to go global in the
future. The data can also be used in a variety of financial systems. Building on the common closed-loop concept, the system can feed information back into itself and other
financial applications, allowing data to be repurposed multiple times. Information
needed for business planning can come directly from the financial close application,
which in turn provides more accurate and detailed data once that planning is put into
action. The software can also help CFOs identify and remove redundant processes
from the close, and provide key performance indicators (KPIs) within — and beyond —
reporting periods.
The second scenario is just as
common: An organization is facing
increasing regulatory and compliance
requirements that are changing so
quickly and so drastically that their current system simply can’t keep up.
Both are simple to fix, both from a
technology and consulting aspect, says
Rajesh Krishnaswamy, General Manager
and Global Head – Banking, Analytics &
Information Services, Wipro Technologies. “For some engagements, we have
close to a 70-person team that can help
define and create a new information
platform along with very strong key
performance indicators,” he explains. In
one recent instance, Wipro was able to
reduce to eight days what had previously
been a 45-day close. “We delivered this
functionality over three different releases
and improved every aspect of that client’s financial close.”
“Rather than wait until the end of the month when you close your books to look
at data cells and make changes that are required, CFOs can keep track of KPIs and
reports and make necessary changes while the close is still occurring,” explains Krishnaswamy. This provides a high level of transparency and visibility as well.
Finally, one of the most significant benefits of an automated system is the inherent
set of controls and paper trail that it creates. An information management platform
adds both auditability and credibility to the organization’s financial record keeping.
It ensures that the quality of the financial data is sound while creating a permanent
activity log of financial reports. In addition, it provides flexibility and adaptability for
everyone in the finance organization.
STEPS FOR THE CFO
Although the process of automating and implementing electronic workflow
capabilities may seem daunting, there are some simple steps CFOs can take to make
the transition simple and pain-free. The first step should be taking a snapshot of the
current infrastructure and processes so that they can be used as benchmarks when
evaluating potential technology solutions. Once it is decided that an automated solution is the next move, experts say there are several characteristics of a solid financial
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APRIL 2013
close automation platform that CFOs short-list. However, it will be important to
consult with both the business and the rest of the financial services team.
CIOs can ensure compliance and use of any new systems and processes by involving
the staff in the pre-assessment process. What do they think are the biggest issues with
the organization’s financial close? What would they like to see happen? What features and
Finance — with the help of
IT — can put into place
solutions that enable
automation of the financial
close and related activities.
functionality would they like to see implemented? To make changes it will be crucial to
get complete buy-in from everyone in the finance department. In addition, you’ll need to
work toward true alignment with finance and the business, providing a clear line of sight
between the two. Another topic of discussion that should be on the table: the operating
model and its design structure, which are both equally important.
The finance staff’s suggestions are likely to mirror expert advice. For instance,
experts say the best governance, risk and compliance, data assurance, and financial
consolidation technology solutions provide electronic workflow capabilities that include
tasks related directly to the financial close. Solutions that have built-in task-management
capabilities and open item-management areas are also rated highly by the experts.
Finally, solutions that incorporate visualization technologies can improve the financial
close, since they enable finance teams to automate the production of their monthly
management accounts and allow senior finance managers to carry data on mobile devices
and tablets.
When these evaluations are done correctly, finance — with the help of IT — can put
into place solutions that enable automation of the financial close and its related activities, such as the matching and governance that balance sheet reconciliations involve.
This leads to significant gains in productivity and resource savings, as well as an increase
in the integrity of the organization’s balance sheet. It is only then that companies can
implement commercial change and business transformation — the intended outcome of
finance automation.
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APRIL 2013
ABOUT ANALYTICS AND INFORMATION MANAGEMENT SERVICES
Wipro is a leading provider of analytics and information management solutions—
enabling customers to derive actionable business insights from data to drive growth,
enhance cost management and strengthen risk management. Wipro works with
customers to develop end-to-end analytics and information strategy leveraging
process assets and solutions based on analytics, business intelligence, enterprise
performance management, and information management. For more information,
please visit www.wipro.com/aim.
ABOUT WIPRO TECHNOLOGIES
Wipro Technologies, the global IT business of Wipro Limited (NYSE:WIT), is a leading
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to enable its clients do business better. Wipro Technologies delivers winning business
outcomes through its deep industry experience and a 360-degree view of “business
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For more information, please visit www.wipro.com.
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