Analyst Viewpoint

Ventana Research advocates the adoption of “continuous accounting,” an approach to managing the finance and accounting department that improves performance and increases productivity. There are three pillars to continuous accounting:

• Spread workloads continuously across the accounting calendar to minimize period-end spikes, accelerate the close, and reduce staff burnout.
• Continuously control data flows digitally end-to-end in every process to ensure accuracy, consistency and reliability, thereby accelerating processes while reducing the need for checks and reconciliations. Financial statement fidelity and auditability can be assured with less work.
• Manage the department with a continuous improvement mindset to regularly explore performance improvement opportunities.

Making full use of practical and affordable digital systems is the common thread that connects these three pillars. Taking an active approach to evaluating opportunities for performance improvement using available software can be the key to achieving ongoing advances in departmental effectiveness. When taking the initial steps into finance transformation, whether driven by economic factors or the internal desire to automate finance functions, acquiring software was the answer for most companies. Two common areas of focus were automating reconciliations and using workflow automation. The latter helps ensure smooth and rapid process handoffs even with a remote or hybrid workforce, while also ensuring the completion of all necessary reviews and approvals. Our Office of Finance Benchmark Research confirms the value of this technology: 88% of enterprises that automate all or most of their close processes can complete their quarterly close within six business days compared to 40% of those that use little or no automation.

Despite significant investments made by adopting technology, finance and accounting departments have made little progress in closing sooner. Today, only one-half of participating enterprises can close within six business days, the benchmark norm, which is about the same as five years ago. The reasons organizations give for why they should accelerate their close have been consistent. The most cited reason is having more time for review and assessment before crafting the management discussion and analysis, followed by providing management and financial accounting to executives sooner. However, these technology investments may not yield the benefits teams initially sought to achieve due to continued staffing challenges, software underutilization or broader strategic misalignment.

So how can organizations address these root causes? The answer lies in making full use of available software. Instead of simply focusing on how to execute tasks more efficiently, they should investigate ways to use digital technology to automate processes and eliminate the need to perform tasks manually in the first place. This includes changing their approach to consider the upstream and downstream impacts of implementing a digital technology.

Many organizations typically acquired software reactively to address some specific issue without considering a broader approach to achieve a more consequential outcome. They often implement or use only some of capabilities that an application can perform. For example, only centralizing and standardizing reconciliations without taking advantage of system functionality that can automate matching in transaction heavy processes such as bank, credit card and payroll reconciliations. They can bring subledger data onto the face of the account reconciliation for better visibility into transaction-level details for faster insights. They can take further advantage of platform synergies by then using automated journals to record the results of these matching processes and recurring entries including bank and credit card fees, investments and depreciation without manual intervention. In so doing, they can cut staff workloads and achieve greater productivity, consistency and timeliness while improving auditability. Close automation platforms provide enterprises with more than just the ability to collect and store documentation and hold the always-current month- and quarter-end checklists. The potential for truly optimizing the financial close is boundless.

Continuous accounting uses an active management approach to technology that improves the performance of finance and accounting organizations. Ventana Research strongly recommends that department executives employ it to remain competitive, especially in this era when attracting, retaining and reskilling the best talent is a business-critical requirement. A continuous improvement program should include ongoing assessments of how software—especially those applications that are already in use—enables the organization to substantially reduce staff time required to do tasks and processes that are best left to a computer. They should look for ways to eliminate the potential for data errors and inconsistencies by using digital technology to ensure data integrity end-to-end in a process. They should seize opportunities to enhance productivity to de-stress the close and allow the business to scale without adding administrative headcount.