Why a Quick Financial Close Is Not Always Better

With the quickening pace of the modern finance and accounting (F&A) landscape, the mandate often seems to be "faster, faster, faster." One area where this feeling is prominent is the in the accounting cycle’s financial close. F&A teams often feel intense pressure to complete the close and create financial statements quickly, sometimes at the expense of accuracy.

Focusing on this need for speed—but with the critical requirement for accuracy—business leaders are increasingly choosing automation tools as the best way to achieve both.

However, in the rush to streamline processes and boost productivity, a crucial aspect often gets overlooked: the importance of a thoughtful, strategic approach to automation.

While the allure of automating tasks and integrating the latest technology into F&A workflows is undeniable, simply layering automation onto a broken process can be disastrous for any transformation initiative.

When a company invests in automation tools to expedite its financial close process and financial report creation, the expectation is that it will lead to less manual work, reduced errors, and improved overall efficiency. What often goes unrecognized is that automation is not a magic wand for all operational woes. Without addressing underlying process issues or developing a comprehensive plan for using the new tool and resulting staff capacity, the outcome may not match the company’s goals for transformation.

The truth is: successful change requires more than just technological upgrades. It demands a holistic approach that encompasses process optimization, cultural alignment, and strategic planning. It’s important to put in the time up front to ensure long-term success in finance automation and transformation journeys.

Automating finance processes without first understanding the intricacies of each step and considering the broader implications can lead to chaos.

The way a company integrates changes into existing workflows and then automates them can make or break their effectiveness.

For example, automating journal entries without addressing underlying issues such as inconsistent data entry or unclear approval hierarchies may result in inaccurate financial records and manual rework—the very things you were likely trying to eliminate in the first place!

A strategic approach that prioritizes process optimization, stakeholder engagement, and change management before automation is essential to ensure that efforts yield meaningful improvements while mitigating risks and enhancing compliance.

Business leaders are looking to predictive analytics and intelligent forecasting for various reasons, including better decision-making, risk management, enhanced planning and budgeting, and improved competitive advantage.

However, advanced analytics and forecasting depend on the completeness and accuracy of your foundational accounting data. Actuals serve as the starting point for all subsequent financial operations activities, acting as the basis and input for critical decision-making processes. Downstream financial activities such as budgeting, forecasting, and strategic planning rely heavily on the accuracy and integrity of actual financial data.

Back to a concept we discussed earlier: if you’ve simply automated incomplete or disparate processes, you’re not working from reliable actuals and other foundational financial data. Without the solid groundwork of accurate actuals, even the most sophisticated forecasting models or predictive analytics will produce flawed outputs, leading to misguided decisions and missed opportunities.

Organizations must prioritize the establishment of robust processes and controls to ensure the integrity of their actuals, recognizing them as the cornerstones of sound financial management. Only then can teams and leaders realize the full benefits of advanced tools and technologies to drive meaningful insights and sustainable growth.

Here are 5 practical steps to get started:

1) Set your digital finance transformation goals. The best place to start is mapping out all upstream and downstream activities in your financial close operations and understanding how they contribute to your business's overall strategy. It may seem arduous, but it’s vital groundwork that ensures your technology solutions are aligned with your immediate and long-term goals.

2) Focus on mission-critical accuracy. Be very strategic about the moves you're making to maximize impact and minimize disruption. A good place to start? Journal entries and reconciliations.

3) Entrench a data quality culture within your team. Get your staff on board with how and why technology is aligned with bigger strategic goals. The goal is not simply to automate a single reconciliation or journal entry workflow.

4) Reallocate time to strategic initiatives. Review your overall strategic goals and identify the best ways to reallocate your team’s time so everyone is aligned with your organization's key objectives.

5) Rinse and repeat. Get some wins under your belt and then replicate them! It’s all about a series of controlled, strategic moves towards your overall organizational goals.

If you’re sacrificing accuracy and reliable actuals for speed, then it’s true—a quick close is not always better. However, forward-looking companies will put in the work upfront to create plans to achieve goals, map out and fix broken processes, strategically automate critical practices, and reallocate time.

A quick and accurate financial close provides opportunities for leaders to analyze the financials sooner, free up more time for F&A teams to address other organizational goals, save time and money, and improve compliance, among many other benefits.