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Most Danish companies perform this process manually or semi-manually, which presents a number of challenges from a lack of overview to vulnerability in Finance and a risk of human errors. But how can you improve the process? We'll focus on that in this article.
Did you know that both the monthly reconciliation and the year-end closing is still made manually or semi-manually in three out of four Danish companies? It's a heavy, time-consuming and not least frustrating process. Often half of Finance's resources are spent on the month-end and year-end closing processes, which is an undesirable and non-optimum use of the resources. At the same time, it creates a bottleneck during Finance's most hectic period.
That's why we'll recommend you to consider automating this process. This involves a number of advantages. For example, working conditions in Finance will be improved, the number of errors will be reduced, and it may be an important step towards faster closure and, thus, faster reporting.
But in order to understand the advantages of an automated year-end closing pocess, we have to have a closer look at why manual or semi-manual year-end closing processes present so many challenges.
Time-consuming and vulnerable with a lack of overview
Only a mere 28 per cent of Finance employees have confidence in the monthly figures. And a major part of the reason for the lack of confidence is to be found in the manual systems and processes with which Finance is working. Manual systems are particularly vulnerable to human error - be it in the form of wrongly inserted figures, incorrect documentation, or tasks that have been overlooked.
If you are among those who base your company's year-end closing on manual or semi-manual processes, you presumably also recognize this list of symptoms:
- It takes a long time to perform the process and it demands many resources from your Finance function.
- It's difficult to have a continuous, updated overview of the process and of who does what when - both for the employees and for the management.
- Several tasks are vulnerable because they are person-dependent and, due to the lack of overview, you cannot just redelegate tasks if a key employee falls ill.
- You have to check - and double-check - that the documentation has been enclosed the right place, and despite of this errors may occur.
- It's difficult for the employees to plan their working hours because they lack an overview of their tasks and roles during the year-end closing period.
- The lack of overview means that it's impossible to prioritise the tasks according to their importance and deadline.
And as if this wasn't enough, the requirements for more transparency, better documentation, faster reporting, overview of who has approved what, and instant presentation of financial data are made stricter - often by the company as such as well as by legislation.
This results in a situation that we unfortunately often see in our relations' companies - that the company has a great number of rather small tasks and routines that prevent Finance from adapting to the stricter requirements; tasks and routies that are not critical and that could perhaps be dispensed with. And often the reasons are the same: a lack of time and a lack of overview.
It is, in other words, difficult for you to assess whether your Finance function spends its time in the best possible way.
Advantages of automating month-end and year-end closing
What to do now then? If you recognize the above list of challenges to the month-end and year-end closing and dread having to go through the trouble this January, what can you do?
Our answer is simple and complicated at the same time: You could consider automating the processes and transactions in your Finance function.
It's simple because the advantages of automating your month-end and year-end closing process are many:
- It simplifies the auditing process. In connection with audits, documentation should be stored in only one place - and the auditor gets digital access.
- It creates a better overview of tasks, mutual dependencies, priorities, deadlines, and time consumption.
- It creates a better overview and, thus, minimizes the risk of errors.
- It gives your employees better working conditions because time is released and they get a better overview of the deadlines of their most important tasks.
- It reduces the risk of human error and accounting-related risks because the documentation is located in one place.
- It simplifies the company's administrative processes and helps present more transparent and exact information in a shorter period of time.
In other words, much value is to be had for everybody - both Finance and the company's other internal and external stakeholders. And the right automation solution will allow you to release many resources for other (development) tasks in Finance, which will save you both money and time, while at the same time strengthening the role of Finance as a business partner.
That was the simple part of the answer. Now for the more complicated part.
To make the most of the automation, the solution you choose must fit your company and its needs. And there are several parametres to take account of.
How to find a solution fitting the needs of your company?
The solution you choose must be able to meet the company's current and future needs.
This means, i.a., that it must be flexible and scalable, allowing you to improve and update its functionalities when and if needed. The solution must be able to process great quantities of data in a very short time, and it must be easy for your employees to generate the reports and graphs that they need. And, finally, the solution must be able to deliver a good overview for all those involved - whether they are employees, the management, or auditors.
The good news is that many good solutions are available on the market, and there is no doubt also a solution that fits the needs of your business.
But how will you find the best solution for you and your business?
By creating a clear overview of your company and its needs, thereby ensuring that the tool that you invest in is actually also the best fit when it comes to solving your particular tasks. So, put briefly, you must specify the company's needs, requirements, and thus its procurement criteria.
Which system your company needs depends on a number of different factors - such as the size of the company, its complexity, the number of legal entities, etc.
Another difference may be whether you company prefers a cloud-based solution or whether you are obliged to store your data on-premise.
In this connection, it is our definite recommendation that you get external assistance for preparing a system and supplier due diligence for the various systems.
From a backward-looking reporting department to a forward-looking strategic partner to the business
By means of the right automation solution, you can ensure that next year's closing process becomes more efficient, exact, and value-creating for the entire organisation.
Furthermore, automation of the year-end closing process is not only a technological upgrading, but also an investment in the role of Finance. Automation of the year-end closing process can transform your Finance function from a backward-looking reporting department to a forward-looking strategic partner to the business. By releasing valuable resources and, at the same time, minimizing the risk of errors, your Finance function can focus on providing support to your business initiatives with its financial expertise as an active sparring partner.
And if you are willing to automate your year-end closing process, you company is already now well on its way towards a more successful and less stressful year-end closing process. The next step consists in mapping the needs of your company so that you can start examining the market to find the right tool.
Use your resources in the best possible way
We at Basico can help you get on with the automation of the month-end and year-end closing process - contact Senior Partner Morten Bille for a non-binding talk.
