An accelerated preparation of the financial statement (fast close) is often regarded as the CFO's key qualification. With good reason, because a fast presentation of high-quality control information can only be guaranteed if all previous processes run smoothly.
The goal itself is also understandable, as the relevance of the figures from the management's point of view decreases every day after the last trading day and otherwise other sources are used to evaluate the situation.
However, as is almost always the case in process optimization, you will come to a point where further optimization becomes very time-consuming or you have to work with compromises. Compromises can be, for example, estimates or the use of plan data. Both with complex optimizations and with compromises you should ask yourself whether the actual goal is still promoted or whether you’re doing yourself a disservice.
How are the right conditions for Fast Close created?
Skillful fast-close management consists of two tasks:
- The process must be viewed holistically and optimized under consideration of the closing time - and this on a regular basis.
- Even if the process has been thoroughly optimized, a responsible person (drum master or process manager) must be appointed to manage each closing together with the parties involved, as well as the due dates and delays.
Optimizing the overall process from the closure perspective means identifying the critical path and defining the timelines for each step. Even the rough process, more precise the closing of the local accounts and cost accounting, the consolidation of the financial statements and the preparation of the reports as well as the commenting of the results, make it clear that, on the one hand, dependencies exist and, on the other hand, that the starting points - as is often hoped - are not of a purely technical nature. Nevertheless, it is often interesting to observe that for the local financial statement only a few days or hours are taken, but the coordination of the comments takes a disproportionately long time. The transparency of the entire process is extremely helpful for the discussion required here.
By the way, the complexity of the task increases even more if not only actual figures but also forecast figures are to be reported.
Optimizing the closing process as the first step of Fast Close
When optimizing the closing process, we can refer to the comments on disclosure management, consolidation and accounting excellence. But let's pick out a few important points.
Very often it is observed that valuable time is not lost to externally driven activities, but to homemade issues, namely intercompany settlement. More organizational stringency would significantly accelerate the process and also reduce the effort here.
A second example for homemade topics are accrual postings. Many systems, such as SAP, offer an automatic Accrual Engine, which immediately generates the accrual postings when the business transaction is entered. Instead of using these instruments in the process, unclear Excel sheets are processed to determine the accruals in the financial statement.
The optimization of the basic Order-to-Cash and Purchase-to-Pay processes of the local companies is much more complex. The closing of the local accounts is dependent on the business model. It is obvious that business models, in which many outgoing invoices are issued daily, can work in a faster routine than those which provide services over a longer period of time, which have to be evaluated monthly and possibly also accounted for as unfinished services. In order to accelerate the process, the recording and evaluation of services must be optimized.
Conclusion: Follow the data from the report along all processes and write down the necessary steps. Analyze the time at which the data is made available and the effort involved in processing and then formulate theses for acceleration, which always starts as far ahead as possible in the overall process. You will be amazed!
Process management as the basis for further optimizations
Now you will probably ask yourself why a process manager is still necessary. The answer is simple: if a result has to be completed at a certain point in time and many participants are working on it, then it is a good idea to monitor this completion and actively work on obstacles. This is no different in the planning process than in the closing process or in the project business.
This person in charge can also pull the emergency plans out of his pocket in case systems fail, employees fall ill, data is not available on time, etc. The person in charge of the planning process can also monitor the completion of the planning process and actively deal with obstacles.
In addition, this role is an important prerequisite for further, regular optimization.
Fast Close ist just the tip of the iceberg!
It has become clear that there are original optimizations of the closing process, such as the automation of consolidation entries or comments in disclosure management. The majority of the optimizations, however, extend into the operational processes and thus affect the general process efficiency and accounting excellence.
The closing process is the key qualification of the CFO!
