Financial close Ledger Image credit pixabay/cpastrickThis week Sage published the results of its Close the Books Survey in an eBook entitled “Living on the Ledger”. Sage published a preview version with the full version available with registration. Its headline finding was that  “businesses can shorten close process times by 36 per cent by switching from spreadsheets to cloud financial management”.

Enterprise Times had access to the full report, and Sage also provided answers to some questions, providing further detailed analysis from the report.

Dan Miller, Sage’s EVP of Medium Segment (interim)
Dan Miller, Sage’s EVP of Medium Segment (interim)

Dan Miller, Sage’s EVP of Medium Segment (interim), commented: “Today’s finance leaders are being called on to not only report the numbers but to provide strategic guidance for their organizations. Long, onerous close processes not only dampen team morale, but impede an organization’s decision-making when it can’t get current, accurate information at critical times.

“Having the right technology in place enables finance and accounting teams to speed the close and gain faster insights as they evolve from being historians to visionary business leaders.”

The Report

The full report is 25 pages in length. There is an executive summary, three main sections and a conclusion. The three sections cover:

  • The State of Financial Close
  • Common Financial Close Bottlenecks
  • How top performers leverage technology to close faster

The report is based on a survey of 1,600 mainly finance professionals from across a range of industries.

  • 49% of the respondents had revenues of less than $25 million
  • 22% between $25 million and $99 million
  • 5% did not reveal their revenues.

Importantly, 62% has more than a single entity within the organisation, making consolidation an issues in financial close management. The products currently in use varied with a significant number from Sage Intacct, Other Sage solution,s QuickBooks and a view respondents were using NetSuite or Microsoft Dynamics.

Sage cited its recent CFO 3.0—Digital Transformation Beyond Financial Management, 2020. That stated: “The role of CFOs and Controllers has changed more in the past five years than in the previous 50 years. They are increasingly being called on to not only run day-to-day accounts but to provide strategic guidance to the organization.”

The question is whether finance teams have been able to transition and whether the financial close is holding them back.

The State of Financial Close

The results demonstrated that the financial close is still an issue for many, though larger organisations often have better processes. Organisations with more than $250 in revenue took only 8.8 days on average to close, lower than all other organisations. Why? Sage found that the larger organisations automate 23% more journal entries than the next small set of firms ($100m – $249 Million).

While Sage Intacct advocates that cloud technology makes a significant difference, this is mainly the case for those larger organisations. The additional information provided by Sage provided some interesting insights. Organisations with revenues of less than $249 million spend around the same time close regardless of whether they are using on-premises or cloud solutions. It makes a big difference with organisations of $250 million revenue, though, 7.8 days vs 10.3 days.

Some of that time difference is where organisations need to consolidate different entities. Where there is a challenge, the cloud makes a difference. Organisations spending more than 40 hours on consolidation use up 17 days when using on-premise solutions but only 11 on average with cloud software.

Interestingly this also flags that there is still a significant market for financial consolidation software vendors such as Adaptive Insights, FloQast, Planful, Prophix and others.

Challenge of Financial Close

This section highlights the challenges faced by finance teams. The top five areas that inhibit consolidation are:

  • Data manipulation in spreadsheets
  • Data imports and exports
  • Information hand-offs
  • Reconciliations
  • Investigating anomalies

The survey highlights the difference that these challenges make to the close process, often in a difference of days rather than hours. The inference is, solve the challenge and reduce your time to close. For example, those most impacted by spreadsheets spend four days more than those less impacted.

Cloud financial management systems provide users with opportunities to eliminate or reduce these manual tasks. They are designed to enable companies to complete key tasks like consolidations, accruals, and allocations directly in the system instead of maintaining a separate spreadsheet for these tasks. Cloud-based systems also offer application programming interfaces (APIs) that make it easier to connect with other business systems to automate their data imports/exports.

Top performers leverage technology

49% of organisations are still using on-premise or hybrid accounting systems. Hybrid may mean a mix between a legacy on-premise solution and a cloud-based planning or consolidation solution. However, without a qualitative question, is it not entirely clear. What was surprising is that the 30% not using a cloud-based solution are not yet planning to migrate. 22% are putting the decision off for more than two years.

There are clear benefits to moving to the cloud. Remote working presented far less of a challenge than those using cloud-based solutions, 61% to 32% for consolidation. With remote working likely to continue for some time, it is surprising that more do not consider the migration. Another important statistic that Sage highlighted is that investing in technology delivers a 25% faster close than investing in headcount. The report highlights automation and continuous close as key factors in the improvements delivered. Those automating more than  50% of their journal entries close the books 20% faster.

How Sage Intact can help

The report infers that Sage Intacct and its cloud-based financial management solution can help. Enterprise Times asked Rick Kawamura, Director of Product Marketing for Sage Intacct, how can Sage Intacct be used to improve consolidation and collaboration efforts across applications?

“Increasingly more companies are adding entities as they expand overseas, adding entities for legal protection, and/or pursue M&A or joint partnership plans. But organizations face complexities like inter-entity transactions, intercompany eliminations, currency conversions, and more when consolidating the financial results of their entities.

“And relying on financial solutions that were not designed for multi-entity organizations usually means consolidations tasks need to be done out of system in spreadsheets, which is time-consuming and error-prone. Sage Intacct was designed from the beginning with multi-entity needs in mind, offering automation of consolidations tasks that can otherwise take finance teams days to weeks.”

On Collaboration

With 58% of respondents citing information hand-offs as a challenge,  this raises a question around collaboration. Enterprise Times asked Kawamura how Sage Intacct integrates Slack and Teams?

“Currently, there is not a pre-built integration between Sage Intacct and Slack/Teams. However, Sage Intacct has an in-system messaging tool, called Collaborate, that allows users to collaborate within the context of transactions. Posts are stored with the records you post them on, along with any attachments you add.

“People with appropriate access see your posts in real-time so they can respond quickly with helpful information. For example, say the finance team is assigned to the period close. Using Collaborate, members of the team can participate in conversations about the close. When someone makes a change or a document is modified, group members are notified.

“The tool reduces the need for endless email threads or use communications tools outside the system, instead letting teams communicate right inside Sage Intacct to resolve specific journal entries, projects, invoices, purchase requisitions, and more. In addition, Collaborate works back and forth between Sage Intacct and Salesforce with a Salesforce integration.

“Salesforce users can also have the same conversations appear in Salesforce Sales Cloud, so other groups outside of finance, such as sales teams can participate using the system they’re most familiar with.”

Enterprise Times: What does this mean

This report makes for fascinating reading. There are several strong take-outs, not all of which are what Sage Intacct might have expected.

The larger and more complex the firm, the greater the advantage that cloud accounting software delivers for the financial close process. This does not mean that there are no other advantages for organisations to implement cloud solutions. The benefits such as helping with remote working are clearly present.

Secondly, consolidation is not easy. While Sage Intacct helps organisations to close faster, there is still room for improvement. Something that the specialist vendors frequently point out in their analysis. That remains the case.

Finally, finance leaders need to look carefully at their challenges and identify whether they can free up time for more strategic work. If they want to, then the answer almost certainly lies in technology investment rather than adding more people.


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