The month-end close refers to a group of activities performed after the end of the fiscal month to record relevant transactions, verify and review accuracy of account balances and issue financial documents. Traditionally, closing activities are completed in the accounting and finance function, and a large portion of the work can be categorised as manual, repetitive and administrative.
In the past 20 years, virtually all other areas of finance and accounting – accounts payable, accounts receivable, budgeting and forecasting – have already experienced the benefits of digital transformation, as more and more affordable solutions become available to automate these processes. Benefits of process automation typically result in far less processing time, a higher degree of accuracy and better utilisation of human resources – the month-end close process can reap these benefits as well.
What does automation entail?
Automation in the realm of the month-end close can apply to numerous activities that are primarily done manually, for example:
- The preparation and review of balance sheet reconciliations.
- The completion and management of closing checklists and process workflows.
- Journal entry approval and posting.
- Balance sheet flux and/or P&L variance analysis.
- Data and analytics on the health and status of the month-end close.
Not only are there different automation options available in the market today, but these options are flexible and can be layered together, if desired, to further optimise the close process. There are three general automation paths:
- Generic workflow / Digital solutions
These solutions have enjoyed immense global popularity in the business world for the last 10+ years due to their adaptability for multiple processes. Tools such as SharePoint and Adobe Sign, although not customisable for process subtleties, allow companies to build general process workflows and can be applied to any process, such as the month-end close.
- Dedicated month-end close solutions
Out-of-the-box solutions that are built specifically for month-end close not only introduce automation to the close, but also come with the benefit of providing best practice process improvement suggestions and the ability to automate internal controls. Dedicated month-end close solutions are typically offered as a SaaS offering.
- Robotics Process Automation
Solutions that specialise in robotics process automation (RPA) allows for the building of custom workflows to handle repeatable tasks that would otherwise require humans to complete. RPA can be layered on top of dedicated month-end close solutions to further optimize automation opportunities for the accounting team.
What to consider prior to adopting automation?
Each organisation should evaluate available options with the following criteria in mind:
- Existing capabilities – Some ERPs have limited capabilities when it comes to month-end close automation, and those functions should be studied carefully so that there is no overlap with any new software purchases.
- Desired outcome – Each automation strategy on the market has its own value proposition and areas of focus. Those strengths should be aligned, as best as possible, with the organisation’s internal objectives and desired results.
- Internal capability – The more complex the solution, the more specialised skill set it will require when it comes to implementation and maintenance. Ensure that your organisation has the necessary skill set to properly support and optimise the solution of choice, as well as the resources required to upskill / reskill existing staff.
- Price point – Return on investment, both hard and soft, should be assessed prior to investing in automation to understand where savings will come from and to set proper expectations.
The future of month-end close automation
With all automation options, it is increasingly likely that artificial intelligence and machine learning can be embedded to further capture speed and reduce manual intervention. The journey to a faster and more confident month-end close is becoming both easier and more critical, as more and more CFOs require access to accurate financial performance soon after the fiscal month-end. Infusing automation into a largely manual process is the simplest way to meet higher expectations.
To learn more about the future of month-end close automation, download SkyStem’s complimentary report: From Weeks to Days: Boarding the Mid-Market Financial Close Bullet Train