Financial close: Challenges for midmarket companies

Aug 03, 2022
  • finance
  • SAP
  • OpenText
  • artificial intelligence & RPA

My favourite task is financial closing: says no one. Too often, the process associated with tedious, error-prone tasks, underpinned by the pressure to close the books as fast as possible. And while critial business decisions often hang in the balance, the financial reports that they rely on depends heavily on their accuracy and reliability.

Due to intense competition and uncertain market conditions, businesses must pivot and adapt their business models rapidly. A seemingly routine and necessary financial close process can be immensely beneficial when done right. It can bring confidence and speed to financial planning and decision-making.

For many midmarket organisations, it is beneficial to streamline and automate their accounting practices as they rely on smaller teams.

Below are common challenges finance teams face:

Lack of accounting SOPs and structure

The financial close process is often the basics for finance team leaders. In many midmarket companies, the process usually involves a couple of senior finance executives – who know the financial close process in detail. They often do not feel the need to introduce more formal, granular standard operating procedures (SOPs). As a business grows, more defined SOPs are required. Getting buy-in from stakeholders for more rigorous operational procedures can be challenging if the benefits of doing so are not widely recognised in the organisation.

Largely manual month-end closing process

The one report the C-suite and shareholders rely heavily on for critical strategic decisions is the financial close report. Having it timely and up-to-date is therefore of utmost importance. Unfortunately, this is not the case in many instances. The finance team often spends a lot of time manually scrambling between the countless excel spreadsheets and email reminders to produce a report on time.

Inaccuracy and late financial data

 It will only take some inaccurate or incomplete data from one business area to disrupt the entire financial close. Every department in an organisation produces invoices, expenses, and purchase orders. Yet, in many companies – especially midmarket segments, there is a lack of a consistent process around financial reporting. Last-minute requests at month end can often lead to frustration and mistakes. Due to the lack of tools, solutions and processes, the daunting process of financial closing is prone to human errors.

Business silos and poor data integration

Along with the inaccuracies and delayed data from departments, finance teams struggle with the siloed and disparate reporting systems across the business. The list includes different metadata or data structures for the names and numbers of accounts, names and numbers of products, customers, divisions, etc. This becomes additional work for accountants as they have to reconcile and make sense of disparate information, often resorting to manual, error-prone processes to ensure the data is in a consistent structure.

Roadmap: Financial Digital Transformation

Exploring how businesses can approach digital transformation strategies for their finance teams.

Tips for a smoother financial reporting and accounting closing process

The financial close delivers reports and insights that are most crucial to the growth and operation of your business. However, due to their complexity and detail, they are often among the most dreaded of corporate activities. But by standardising procedures, developing good communication strategies, and leveraging robust accounting software solutions, businesses can ease the process, making it more efficient.

Identify inefficiencies and error-prone accounting processes

While digitalising and modernising current accounting practices, midmarket businesses can use this opportunity to build a task force of representatives across the departments. They can be given a set of risks and issues to look for. These findings could be consolidated and assessed to better depict where there is room for improvement.
This exercise can unearth bottlenecks and delays but also calls attention to activities still being done in silos on manual spreadsheets. This process sets the stage for developing SOPs and the roll-out of more connected and automated accounting tools.


Support SOP roll-outs with good change management practices

While the accounting team is responsible for a smooth financial close, they depend on every department to get this done. Suppose departments are expected to deliver with speed and accuracy. In that case, the company must ensure that everyone across the business is on the same page.

Successful midmarket businesses often start with a good change management strategy. Communicating the importance of standardising these financial tasks and laying down protocols of who owns what and when. As these SOPs are being created and rolled out, intelligent financial management tools such as Cloud ERP could be introduced to support these tasks.


Implement and support a ‘soft-close’ accounting process

“Continuous accounting” means that instead of all the departments scrambling on the 29th of every month, automated workflows can be established to spread financial close tasks evenly throughout the reporting period.
Automation can help significantly streamline this process with mobile apps and pre-defined templates. Together with the cloud, they can be gathered and integrated with daily cross-departmental data in real-time. This helps avoid the month-end panic and empowers teams to spot and rectify errors early. Finally, with books kept current, businesses can perform a “soft close” monthly to avoid shocks or spot opportunities.


Automate and digitalise the financial close process

With an ERP system that can provide cloud-based financial solutions, midmarket businesses can reassign valuable time. Teams no longer need to spend hours manually performing tasks and making sense of messy data. More time can be devoted to strategic and skilled activities that will benefit the organisation, allowing it to grow and pivot quickly in the rapidly changing market.
Going on the cloud means delivering real-time dashboards that allow executives to customise reports and gain insights any time during the month – from whenever and wherever. It also gives the accounting team access to information across the business, using tools that automatically integrate and standardise disparate data sets and provide them with a command base from whence to aggregate and analyse data from across the enterprise.