In our previous post, [Guide] Modern Accounting: How to Overcome Financial Close Challenges, we gave a general overview of the guide-to-blog series highlighting key topics relevant to today’s modern accounting. In this post, however, we’ll delve deep into the world of closing books, external reporting, and some of the challenges you might face closing your books.
Period-close Rundown
For many accounting organizations, the period-close process is the monthly necessary evil that must be performed. It is the process of closing all transactional systems, the systematic posting of each period’s transactions to a summarized reportable set of information for use by management and external consumers alike. There is little perceived positive impact to the bottom line or to the organization as a whole. As a general rule, you only hear about the close when there is a problem or it is behind schedule.
For public companies, the monthly external requirements are even more exacting, requiring set activities and reporting in predefined formats. Additionally, quarter- and year-end financial results are highly scrutinized by investors, and thus upper management, adding pressure and tightening deadlines as management requires additional time to dissect the results.
The period-close process incorporates multiple tasks into two broad categories:
- Closing enterprise resource planning (ERP)
sub-ledgers and general ledgers - Consolidating results into a common set of
data that can be used for reporting purposes
While more-detailed steps are involved, the focus of this section is on the components that are most important to the accounting office and that it can control – namely the consolidation into a common set of data and reporting the financial results to management and external stakeholders.
Challenges in Closing the Books
The corporate accounting office is responsible for accumulating financial results from multiple sources and combining this disparate data into a homogenous set consumable by key stakeholders while still being able to tie it back to the original source systems for auditable results.
Many of these sources are different ERP systems with different Chart of Account (COA) structures, different currencies, and sometimes incomplete data sets that may be fine for the local ERP, but don’t meet corporate or external reporting needs. Combine these factors with global time zones, multi-national calendars, and customs—and you may have a challenge closing the books in a 5 to 10-day time frame.
To learn more on how to overcome financial close challenges, you can download our entire guide here or below. Otherwise, stay tuned for blog #2 in the coming week!
