There has been general agreement since at least the 1990s that organizations should be able to perform this task within a business week. Our research has consistently shown that companies with very similar characteristics (measured in terms of revenue, number of employees, location and industry) vary considerably in the number of days it takes them to complete their accounting cycle. The lack of connection between the structural conditions of a corporation and the time it takes to close the books suggests that the obstacles to a faster close are not innate but the result of poor process design and execution, insufficient automation of the process as well as choices made by finance executives. One of those choices is deciding — for whatever reason — not to close sooner.
The key finding of the research is the lack of progress in accelerating the monthly close and the retrogression in the time it takes to complete the quarterly close compared to research conducted in 2019. This suggests that although finance and accounting departments were able to rise to the challenge of disruptions and have been investing in digital transformation, the impacts of those investments have yet to be reflected in how soon they perform their monthly close. We find that 58% of participants are able to complete their monthly close within six business days compared to the 60% that we recorded in our Office of Finance Benchmark Research in 2019, a statistically insignificant difference. At the same time, the research also shows a smaller percentage of organizations are able to complete their quarterly close within six business days: 44% in 2023 versus 49% in 2019. This metric is in line with our previous Benchmark Research finding in 2014. The quarterly close is more rigorous and requires a broader set of processes, and it is likely that many departments that depend on manual processes find their close takes longer when people are not working in face-to-face conditions.
"A key challenge facing CFOs today is boosting the productivity of their staff,” notes Robert Kugel, Executive Director and Head of Business Software Research at ISG-Ventana Research. “Many accountants left the profession over the past four years and fewer college graduates are choosing accounting careers. The accounting close is a reliable indicator of departmental productivity. Enterprises that take more than a week to complete it should investigate how technology can support process improvements to increase productivity and shorten the close.”
The research shows that too few organizations use software automation in their process. Only 33% automate most or all of their financial close with workflows and 31% automate most or all of their reconciliations. The findings confirm that the ability to close sooner is correlated with the use of software automation tools: 54% of companies that use workflows to manage the process are able to close their quarter within six business days compared to 21% that use some automation or none at all. Perhaps one reason for this is that workflows help those administering the process to ensure tasks are started and completed on time, supervisory work is conducted on schedule, and procedures are performed in a consistent fashion. Programmed workflows enable administrators to manage by exception, providing them with more time to concentrate on things that require their experience and judgement. Another reason is that there tend to be fewer inconsistencies take place. Only 27% of those who use workflows for all or many of their processes said that they are forced to wait a noticeable amount of time for others to complete their tasks before performing theirs, compared to 47% who utilize little or no automation.
If you are interested in learning more about this dynamic insights research, you can view a summary of the report here. For information on how to use this research in your organization, or to purchase a copy of the research report, please click here.
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