The finance and accounting industry is constantly changing with the rapid evolution of technology. Fortunately, this means outdated processes are getting a revamp. In this article, FloQast CEO and co-founder, Mike Whitmire, highlights how the critical close process is becoming more strategic and how it will impact the future of the industry.
The close process, or the close, is perhaps the most fundamental process to modern-day finance and accounting. With influence on both upstream and downstream operations, the close is critical to synergizing a plethora of functions not only for finance and accounting teams but for the organization as a whole.
Unfortunately, this critical process is best known for giving accounting and finance teams a regularly-occurring headache, as it can be convoluted, inconsistent, and tedious. For example, Ventana Research’s smart close reportOpens a new window found that it takes over half (59%) of accounting teams at least six days to complete their monthly close. Even further, all of the stress and time spent on closing the books doesn’t always guarantee an accurate, usable close; according to a studyOpens a new window from Dimensional Research, 75% of study participants said that they were not fully confident in the accuracy of their most recent close. 78% even said they had to reopen the books after they had already been closed.
Due to these issues, the value of the close has historically been overlooked. However, the process has an immense capacity to drive company success strategically, and as more and more accounting and finance professionals recognize this, we’re starting to see a shift to a more modern approach. This new approach favors automation, delivers greater efficiency and useful insights, boosts collaboration, and, perhaps most importantly, utilizes a strategic close to bolster the company’s overall performance and drive profitability.
See More: 3 Game-Changing Accounting Trends to Look Out for in 2023
The Emergence of the Strategic Close
Historically, the close has been managed through spreadsheets, email, collaboration tools, and storage solutions. Some teams even print out all materials, organize them in binders, and manually sign off — something quite difficult to do with remote and hybrid work becoming more of the norm. While these solutions work together, they operate in silos and can be highly challenging to mimic the precise workflows that Finance and Accounting teams follow.Â
On the other hand, the strategic close utilizes modern tech tools – like automation – to drive operational excellence and increase financial velocity and accuracy. It sits in the middle of the “record to report†landscape, transforming transactional data from the ERP into actionable information.
Utilizing automation at a high level, the strategic close creates a more efficient, accurate, and streamlined workflow as well as happier and more productive employees. To give a bit more perspective, think about the strategic close as a prism; with a prism, white light goes in and is reflected in a beautiful output of colors. Similarly, the strategic close can take unusable, raw financial inputs and seamlessly synthesize those into actionable insights that can positively impact a variety of upstream and downstream processes.Â
Particularly as accounting and finance continue to evolve with the addition of new tech tools, the strategic close will only become more necessary and more widely embraced.Â
Three benefits of the strategic close stand out as key drivers to success: its ability to bring about financial transformation, reduce burnout, and increase growth and innovation. Â
The Strategic Close and Financial Transformation
First, the strategic close helps to usher in financial transformation, something accounting and finance teams are being pushed towards these days.Â
So, what is financial transformation? Financial transformation utilizes digital technologies, like automation, to streamline, simplify and optimize financial processes and systems. These modernized financial processes allow companies to uncover more accurate, relevant, and usable data, establish more efficient systems, create a better company culture, and make better business decisions in a timely and informed manner. Overall, financial transformation can positively impact everyone across the business and help achieve overarching company success.Â
The strategic close plays a major role in financial transformation as it introduces the automation needed to streamline processes and churn out more accurate and useful insights. Further, this implementation of automation is often more cost-effective.Â
See More: Top 8 FP&A (Financial Planning & Analysis) Tech Trends for 2023
The Strategic Close and Burnout
Second, with the implementation of automation, the strategic close is able to help combat burnout – a key issue we’ve seen in accounting and finance.
Unfortunately, burnout has grown to be one of the largest issues plaguing accounting and finance teams in recent years. In fact, in a recent studyOpens a new window conducted by FloQast and the University of Georgia, researchers found that almost all (99%) of accountants reported experiencing some level of burnout and, of those reporting burnout, 53% reported burnout levels at or above the average level, and 24% reported high levels of burnout. Only 8% reported low-range burnout.Â
However, the introduction of automation has been shown to have an incredible impact on burnout. Since automation has the ability to take over repetitive tasks, employees are able to focus on more purposeful and interesting work. This, in turn, leads to happier, less burnt out and more productive employees.Â
Even further, when employees are able to conquer burnout and improve their work-life balance, they’re less likely to quit – a particularly important aspect, considering the immense turnover in finance and accounting – and companies are even more likely to see success.Â
The Strategic Close and InnovationÂ
Lastly, the strategic close can help spark growth and innovation in companies. As mentioned previously, automation assumes mundane processes, allowing finance and accounting professionals to focus on more strategic initiatives. More often than not, this means employees can spend more time being creative, driving innovation, brainstorming new processes, and generally helping the company modernize and grow.Â
Particularly as concerns of a recessionOpens a new window continue, ensuring employees have time to strategize and innovate is critical to seeing success in a tumultuous economy. In fact, data from the past forty years, including the 2008 recession, has shown that companies who invest in innovation during economic downturns typically come out ahead of competitors in the aftermath.
The Future of Finance and Accounting
In general, accounting and finance have long been in desperate need of modernization and transformation, and now, steps are being taken to bring about a more efficient and strategic function.
A majority of this modernization stems from the emergence of the strategic close – this new approach to a crucial business process that helps to drive overarching business success by ushering in an era of financial transformation, reducing burnout, and inspiring innovation and growth.Â
In the midst of economic turmoil, business leaders would be wise to hop on the trend of modernized accounting and implement a strategic close process. It will be the mechanism that changes the future of accounting and finance.Â
How are you enabling innovation amidst tech evolution and economic turmoil? Share with us on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .
Image Source: Shutterstock
MORE ON FINANCE AND ACCOUNTINGÂ Â
- Switching from a FinOps Observability to a FinOps Orchestration Mindset
- The Importance of Data Science for Decarbonization Rates in Finance
- Straight from the Accountant’s Mouth: How Companies Can Reduce Burnout and Turnover
- How to Bring New Innovations To The Payments Sector
- The Great Resignation and Growing Importance of Automation in Fintech