By Tatyana Shumsky
As accounting becomes more reliant on technology, finance chiefs
across a range of sectors are reaping substantial benefits from
closing their books faster.
Companies including Red Hat Inc., Duke Energy Corp. and Dun
& Bradstreet Corp. have sped up their quarterly close to gain
quicker access to their results.
It takes most companies four-and-half days to collect the
quarterly snapshot of their financial position in 2017, down from
six days in 2009, according to PricewaterhouseCoopers LLP
benchmarking studies of roughly 500 companies around the world. The
consulting and accounting firm examined the practices of companies
with a median revenue of $2.5 billion.
Companies that have accelerated their quarterly close say having
results in hand earlier makes decision-making easier and helps the
organization become more nimble. The extra time allows the finance
team to perform a deeper analysis, catch errors and invest more
time in planning for the next quarter.
A faster quarterly close was the priority for Eric Shander when
he joined open-source software solutions company Red Hat Inc. as
chief accounting officer in 2015. Mr. Shander and his team spent 14
months streamlining and accelerating the process.
Tasks such as account reconciliation were previously left to the
end of the reporting period, contributing to the last-minute rush.
Now, accounts are reconciled every few weeks. Mr. Shander also
redistributed book-closing responsibilities across the finance team
to ensure a more equitable workload.
Red Hat now closes its books comfortably in two days, down from
five days previously, said Mr. Shander, who was named chief
financial officer in April.
The finance team has been more productive as a result of the
extra time, Mr. Shander said. They have caught and fixed errors,
dug deeper into the data before announcing results and pivots to
identifying priorities for the next quarter earlier, he said.
"We're actually considering moving up some of our earnings
announcements as a result of it," he said. "It's been a huge
success."
Advances in new technologies are also helping companies
accelerate their book-closing process. More companies are
automating their close to reduce the amount of manual activities,
such as journal entries, said William Marchionni, senior business
adviser at consulting firm The Hackett Group Inc.'s Finance
Operations Advisory Program.
"Some top performers are getting management reporting data on
revenue, shipments, cost for goods sold, and other key metrics on a
daily basis from their information systems," Mr. Marchionni
said.
For Dun & Bradstreet CFO Rich Veldran, the lure of cost
savings has prompted investments in robotics and automation
technology that also accelerate the quarterly reporting process.
The data and analytics company closes its books in four days,
despite operating across more than 200 countries, which adds to the
complexity of its financial reporting process.
"There's a real opportunity for us to do things in a much more
automated, faster way, within finance," Mr. Veldran said, adding
that his team is already testing several potential applications for
robotic process automation in the finance function.
A new software system was key to helping Duke Energy streamline
its quarterly close, said CFO Steven Young. The electric utility in
2007 launched a three-year revamp of its financial infrastructure,
after a series of acquisitions burdened the company with a
patchwork of financial systems and processes, Mr. Young said. Duke
reduced its closing timeline by 30% to 40% to just a handful of
days by 2010, Mr. Young said, though he declined to state the exact
number of days. The company has continued to improve its quarterly
close through new technologies.
"The advantage is that you get data disseminated through the
organization quicker, you can then communicate trends, patterns and
that can result in quicker decisions to take tactical actions in
response to the data," Mr. Young said.
Companies that operate across multiple geographies and sell
different types of products and services often require more time to
close their books than a single-product, single geography business,
said PwC's Ms. Paul.
CFOs in a particular sector, such as airlines, autos or retail,
often aim to close their books and report results around the same
time to keep in line with industry norms.
"There's a view that they need to be consistent with their peers
because if you're lagging, it could lead people to wonder why?,"
Ms. Paul said, adding that straggling behind the pack could raise
doubts about management's competency.
And certain sectors, such as banks and financial services, tend
to close their books faster due to greater investments in
technology, she said.
Still, for many other CFOs accelerating the quarterly close
process remains a low priority. Instead, these companies have
focused on meeting increasing regulatory burdens and deployed
resources to operational projects such as entering new markets or
launching new product lines.
"Account-to-report has historically been the last place where
companies invest. It isn't client facing, and they have ended up
doing things on a shoestring," said Hackett Group's Mr.
Marchionni.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com
(END) Dow Jones Newswires
August 14, 2017 07:14 ET (11:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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