Consolidation and Closing of accounts: The 5 best practices

May 18, 2021

Featured-Image_Blog_Consolidation & Closing of accounts: The 5 best practices_EN

As the world of work evolves faster and faster and crises multiply, Finance Departments find themselves confronted with an ever-increasing and multidimensional complexity and a need to adapt ever more quickly. In the consolidation and closing processes, Finance Departments face many challenges to achieve their objectives.

Today’s CFO in the consolidation and closing process

According to the Aberdeen study for Talentia, the problems of finance departments are the following.

Reliability of information

1) 52% of CFOs consider that the decisions they make are not based on reliable information.

What are the CFOs’ challenges?

1) Inaccurate data

2) Gap between financial analysis and business needs

3) Reliability of information

4) Disconnect between budgets and reality

5) Complicated and time-consuming processes

Top challenges on consolidation & closing ? (no space with question mark, please)

1) Accuracy of information

2) Delays in receiving closing information and non-financial populations

3) Data from too many disconnected systems

 The daily life of CFOs

Finance departments are often faced with many heterogeneous information systems to manage all their processes. This multiplicity of solutions requires the information to be reworked manually and several times. As a result, the information is not always reliable. On the one hand, there is the risk of error. And, on the other hand, the data obsolescence for decision-making, due to the time gap between the data extraction and the final reporting.

In terms of constraints, deadlines (regulatory or imposed by the company) and regulations (local/international/sectoral) in constant evolution are two crucial pressure vectors for Finance Departments.

The 5 best practices to adopt

Formalizing processes and allocating the right resources

The process-based approach is essential for finance departments and contributes to improving the company’s economic situation. In order to automate these financial processes, it is first necessary to define its operations.

1) Determine the source data needed to produce the financial statements.

2) Assigning deadlines to each task.

3) Facilitating relations with operational staff for faster and more reliable provision of information.

The finance department must take actions internally to make perfect matches between the expertise of each person and the assignment of tasks. Finally, the Finance Department can outsource to better secure and control its infrastructure and regulatory management.

Automate operations and controls

To identify the operations that can be automated, the entire process of drawing up the consolidated accounts and then the auditing process must be reviewed. The automation allows:

  • Automatic calculation of the consolidation perimeter
  • Automatic import of social and intra-group data
  • Define repetitive processes
  • Eliminate manual restatements
  • Implement controls automatically (closing and consolidation)
  • Automatically produce mandatory statements for the annual report

Dematerialize the process

The health context has accelerated and highlighted the process of dematerialization need in many mid-sized companies in France. For the consolidation and closing process, dematerialization concerns in particular the supports such as receipts, controls, files and reports.

Another major challenge for decentralized teams (or those working from home) is the remote management of teams. Centralizing operations is also key for better collaboration and (secure) information sharing. Finally, the dematerialization of processes allows an improvement of internal and external exchanges (which can be traced and perpetuated) and will facilitate internal/external and informal/official communications.

Moving to a continuous close

Currently, many companies are on an annual or semi-annual closing process. The objective of a continuous closing is to have the possibility of smoothing the work over the year. This way of doing things makes it possible to focus on certain accounts every month, to define the granularity of the controls and their frequencies, to justify and document the revision progressively and to be able to build up the annual closing file over the whole period. This flexibility saves time and eliminates the usual bottleneck.

Giving more time to analysis and communication

The general objective of all the best practices is to give financial managers more time for analysis and communication. The financial processes’ automation and allow financial analyses to be built collectively, improved jointly and professionalized, even at distance. More and more, communication is a growing responsibility of Finance Departments, both for Financial and Extra Financial communication.