Research shows that Global 1000 companies waste up to US$6.48 million every year on manual and undocumented financial close processes, Neil Kinson, Vice President EMEA at Redwood Software, explains how to improve operations with automation.
The financial close can be a struggle for even the biggest and best companies. It’s often a rushed and complex race to the finish line. Many organizations believe that they work as effectively as possible, given the challenges of a fast and accurate close. Unfortunately, that’s not always the case; the devil is in the detail. For many, the financial close is typically supported by a considerable amount of risky and costly manual effort.
The Close Reality
We recently surveyed 56 large companies in the Global 1000 who use SAP® at the core of their enterprise. Organizations with an average number of 83 legal entities dedicate an astonishing 8,300 full personnel days every year to support the close process. The research uncovered a staggering 82% of financial close activities are still completed manually. This increases the risk of human error and adds considerably to operational cost. Most troubling of all we discovered that up to 23% of financial close steps that are formally documented may never actually be executed.
It’s surprising that so many companies still work this way, especially given that the finance department is held accountable for discovering and addressing any variances. If you consider the increased possibility of human error that’s inherent in such large-scale manual activities, you can see the risk everywhere. A quality financial close is critical to business growth, too. CFOs must have the most accurate data available to support good business decisions.
Simply piling on additional manual resources will not make the close more accurate or reliable. It’s also an inefficient way to work. In fact, our research shows that companies waste an average of US$6.48 million every year on manual and undocumented financial close processes that could be automated.
Automate For Transformation
Over the years, businesses have found ways to remove risky manual labor and automate other processes with great results in quality and efficiency. The factory floor is an excellent example of this. The Industrial Revolution transformed how people produced high quality goods in high volume. Now this transformation has to happen in the back-office. With the speed and reliability of information technology today, most repetitive tasks of the financial close are perfect for back-office automation.
Our research shows that 70% of manual close activities can be completely automated. Tasks such as variance analysis, creating an audit trail and compiling data are much better suited for machines than people. Whether a business completes its close in-house, uses a shared service center or outsources, financial process automation reduces repetitive and painstaking manual effort, while it improves data integrity and close consistency. Automation also frees the finance team from production tasks so they can spend more time on analysis.
It’s time that large organizations find out what’s really lurking behind their financial close process and streamline for greater accuracy with less effort. Automated processes give you numbers you can trust—quickly—without the risk, cost or tedium of manual effort.
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