Group Fast Closing and Reporting

By Sam Cheo, Managing Director, Sigma Conso Asia
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There are increasingly stringent requirements and deadlines from the stock exchanges around the world. This, coupled with rapidly changing economy and surge in business complexities, have raised pressures on Group Finance. The deadlines have been cut shorter, manpower has been leaner, but the bar has been raised, to produce more accurate, reliable reports that are fully compliant with the ever-changing standards. In this article, we will share some tips and tricks to achieve a faster and cost-efficient financial closing & reporting processes for your organization.

The Benefits of Fast Close & Reporting

From the company’s perspective, you will have better data integrity, quality reporting & faster information. This will propel management to make better decisions and more strategic forecast. When you manage to do this, you will have competitive advantage in the market. You can react faster to the business needs and do more value-added analysis to serve your customers better. We also see the trend where CFOs and companies, as well as our customers, tie back their financial reputation and company’s brand to the success of their financial closing and reporting. It is not uncommon to see CFOs talking about this among themselves, as a part of their success and credentials. Lastly, we heard more often about changes in accounting standards and regulations. In any case, with a faster closing, fundamentally good process & systems, rest assured that you will be ready, hopefully “fearless”, for such changes in the future.

The Top Critical Issues of Group Close & Reporting

We've seen that most groups have been struggling with their intercompany reconciliations, along with the extensive amount of adjustments which are “only” getting more complex due to changes in local and group reporting standards; late submissions by local entities and incorrect data being submitted. The root cause of late and incorrect submissions from entities lies on insufficient guidelines and tools for the entities to perform their closing process in a more effective and automated manner. Fortunately, the good news is there are real opportunities for improvement that you can seize if you choose to do so.

Real Actions to Optimize the Closing Process

We have listed down in details some real actions to optimize the closing process starting from the entity level to the group and finally to the reporting stage. As a framework, all the proposed actions can be categorized into process driven, people driven, or technology driven.

From the entity’s perspective:

  • Setting up roles and responsibilities, assigning more transparent KPIs to people, and rewarding them accordingly e.g. based on their successful submission.
  • Streamlining group-wide policies & procedures for the entity to follow, such as how to handle differences of reporting standards, how to treat intercompany differences, and define threshold for materiality.
  • Reducing manual works and automating some manual entries on recurring items such as your depreciation, payroll, accruals, within your ERP system.
  • Shifting as many activities as possible to the pre-closing stage. Solutions like the Intercompany Reconciliation tool will really help you automate your intercompany matching, and ease the reconciliations of AR, AP, and Accruals.
  • Creating a clear closing calendar, and more importantly enforcing it.
  • Communicating proactively to all the people involved in the closing process
  • Lastly, you can also create a closing checklist that should be updated by all people involved in the closing as a form of communication.

From the consolidation perspective:

  • Taking a deeper analysis on your chart of accounts and trying to standardize your chart of accounts across the organization by taking into considerations all parameters required for consolidation as well as group reporting.
  • Streamlining the group structure - don’t keep dormant companies for long, dispose them.
  • Adopting more centralized data submissions of all entities and avoiding unnecessary sub-consolidations.
  • Setting strict materiality guidelines with the agreement of auditors

From the technology perspective, the followings are just some example of the automations that a consolidation tool does:

  • Automating controls from entity submissions to consolidation level with validation rules.
  • Monitoring workflow, status, and validation results along with exception reports.
  • Automating reconciliations for Intercompany Balances & Transactions errors/warnings.
  • Automating financial and management reporting with Built-In, Analysis, User-Defined, and Excel-Link Reports.
  • Automating currency conversion
  • Automating eliminations and adjustments

With all this in place, your financial closing can be done in a faster and more automated way. But more importantly, because you have a system and method in place, you do not have to wait until the 12th month, but on the 11th month or 10th month you could start preparing all this. Again, preparing earlier is always better. With a system and a centralized database, you can pull any data across different periods easily in a few minutes time, into a save-able templates. You do this once, and every different period, what you need to do is just to change the period and refresh all the templates.

In summary, from the technology standpoint, there are tools available to help you achieve the group closing and reporting process optimization, from end to end. With an intercompany reconciliation tool, it results in a cleaner and more properly treated intercompany difference. At the end of the day, when you combine this optimization with the consolidation tool that will also take care of your financial reports and disclosures production, you have a complete solution that will effectively help the people to design processes that will deliver a faster closing and reporting for the entire organization.

Note: this article was originally published on LinkedIn.