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The power of the continuous close - new data sheds light on automating finance

Dan Miller Profile picture for user Dan Intacct Miller December 6, 2022
Summary:
Automation can eliminate manual tasks and free finance teams to focus on value-added analysis - but there's more to ROI than these gains alone. Dan Miller unpacks the findings from Sage's 'Close the Books' research.

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(© PopTika - Shutterstock)

It’s no secret – today’s finance pros work longer and harder than ever. They’re under more pressure to accomplish more in less time – especially at period-end, when closing the books creates relentless urgency.

They need to gather information from different systems, load extract files, perform countless reconciliations, gather input from stakeholders, and manually enter all types of data. The result? Too many late nights and weekends – and unnecessary frustrations. Those are just some of the findings from the Sage Intacct 2022 “Close the Books” survey of financial professionals.

But it doesn’t have to be this way. New and innovative automation capabilities in most cloud-based accounting software are helping finance teams save time and reduce stress at when the pressure’s on at month-end.

Automation eliminates the manual, time-consuming processes that drain your productivity by eliminating error-prone spreadsheets, broken formulas, and endless emails. And that frees up the team to focus on the strategic side of finance and contribute greater value to your company. That automation can take several forms:

  • Templates for recurring and reversing journal entries
  • Auto-matching/creation of banking transactions
  • Automation of multi-entity consolidations
  • Seamless data integration with external systems
  • Auto-creation of allocation journal entries
  • Prebuilt dashboards and month-end reports
  • Ability to monitor transactions for anomalies or errors
  • A checklist to track monthly closed activities

Applying automation to create the continuous close

Perhaps the most powerful way to apply the power of financial automation – and reduce period-end stress – is by implementing the continuous close. With this framework, you can run month-end closing processes throughout the period rather than saving them all of the frenetic finish.

With this approach, your cloud-financial software captures data in real time, enables continuous reconciliations, and allows you to make adjustments as you go. The continuous close gives you a clear and accurate picture of your financial numbers at any given time — without going through period-end close procedures. Some of the key processes that companies are automating include proactive searches for anomalies or errors, daily bank reconciliations, and bank or credit card feeds.

Perhaps unsurprisingly, Sage’s research found that the use of automation in closing processes varies by company size. In most cases, the larger the company, the more automation that’s in place. Companies with more than $250 million in revenue automate 40% more than companies in lower revenue brackets. This underscores how greater efficiencies from automation are essential to company growth.

More automation, faster close

The Close the Books study also found a strong correlation between the level of automation a company has deployed and how long it takes to complete the closing. Interestingly, as a company’s revenue grows, the number of days to close increases – until that magic mark of $250 million in revenue. That’s when, the closing period begins to shrink.

In fact, because of automation, larger companies are actually able to close their books 15% faster than smaller organizations, even though they often contend with complex accounting issues like intercompany transactions and foreign currency translations.

Of course, although larger companies can achieve remarkable gains from financial automation, it’s important to note that automation helps level the playing field for small and mid-sized organizations as well. If these smaller companies begin to digitize their businesses and leverage these same capabilities, they gain new abilities to grow and compete with their larger counterparts.

More automation, more analysis

Automation, of course, brings a compelling ROI through productivity gains and greater corporate agility. However, the biggest benefit stemming from an increased commitment to automated finance is the ability perform significantly more value-added analyses. Freed from the burdens of closing – manual work, journal entries, spreadsheet jockeying, and other low-value activities – finance has more time to analyze data, provide insights, and deliver value across the organization.

At the Seattle Indian Health Board, automation from modern accounting software is bringing the kinds of gains that quickly eliminate the understandable skepticism that many organizations have. Finance productivity has increased 50% over a five-year period and weeks of manual labor have been eliminated.

One area that’s seen particularly important improvements: the monthly close. According to Ben Luety, the CFO, the time required for the monthly close has shrunk from two months to three weeks – with a plan to trim that to just two weeks. Where it previously took three days to generate a dozen quarterly reports, the team can complete them in 40 minutes – which represents a cumulative time savings of 20 hours per quarter. In other areas, questions that might have taken two days to respond to can be answered in two minutes. Even simple integration with its expense-reporting application has cut the time needed to tie credit-card receipts to specific grants from two weeks to two days.

Ultimately, the accounting automation and the continuous close represent a contemporary way of managing finance that  more closely aligns with the real-time nature of business today. It positions the finance department to be a catalyst for accelerated corporate growth by enabling the team to spend less time on retrospective bookkeeping and more time looking to future opportunities.

For more on the art of faster closing, check out Sage’s David Appel on How to close 80 percent faster, what every SaaS controller should know.

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