Organizing the Month-end Close: Strategies for Fortune 500 CFOs

Unlock the secrets of Fortune 500 financial close processes! From task management nightmares to AI-driven efficiencies, discover how industry giants are streamlining their month-end close.

The monthly financial close is a complex process for many companies. It involves interconnected tasks with varying risks, requiring diverse expertise and approvals.

All accounting staff must participate in handling transactions from multiple sources that need different verification methods.

The process spans departments, each with unique perspectives on transaction accuracy. Balancing precision with time and resource constraints is an ongoing challenge. Further complicating matters, the close often relies on multiple incompatible tools.

However, before delving into the specifics of how Fortune 500 improve their financial close process, let's explore the steps and challenges involved in the process.

Components and roadblocks in Fortune 500 Monthly Financial Close & Reporting Process

1. Task management: Close tasks are typically managed via spreadsheet checklists, lacking real-time collaboration and updates. These basic checklists often fail as status reports due to manual updates, leading to inefficiencies and sequencing issues. Spreadsheet rows are color-coded for task status, but rarely reflect real-time progress due to infrequent updates during task execution.
2. Task execution: Task execution typically occurs in spreadsheets, separate from data sources and checklists. These spreadsheets vary in complexity based on the techniques used. For example, reconciliation spreadsheets often have multiple tabs for different data sets and matching processes. Color-coding indicates transaction match status. Multiple iterations of matching logic are applied under tight deadlines during close. Though more efficient than manual methods, this process remains error-prone.
3. Journal entry posting: Even with spreadsheet calculations, journal entries must still be manually entered into the general ledger. Notably, all account analysis and reconciliation efforts are futile if the journal entry isn't posted to the General Ledger on time. These issues contribute to a "chaotic close" rather than a streamlined process.

So, what’s the way ahead?

The monthly Financial Close process needs a “Closed” system

The monthly financial close process requires a "closed" system, similar to those used in Accounts Payable and Receivable. This system should integrate all related tasks within a single platform—creating a single source of truth!

A comprehensive "closed" system for Financial Close should include:

1. Real-time data access: Enables incremental reconciliation and analysis, reducing month-end effort.
2. Task management: Provides workflow, collaboration, and approval features, with status dashboards.
3. Built-in spreadsheets: Centrally stores data with audit trails, unlike external tools.
4. AI & ML integration:AI in financial close applies to functions like transaction matching and anomaly detection.

Having explored the challenges and opportunities, let's examine real-world case studies of companies that have enhanced their performance by streamlining their financial close process.

[Case Study]Large Hotel Chain Achieves 95% Automated Financial Reporting By Reducing The Close Time By 75% Across 1700+ Entities

A major hospitality company operates 40 properties across the U.S., serving a large customer base with high-quality accommodations. 

Efficient cash flow management and accurate payment reconciliation are essential for their operations. However, their accounting processes were inefficient, requiring 60 person-hours monthly for reconciliation across 59 entities. This involved manual tasks such as:

• Downloading and uploading banking data to the ERP system
• Matching data with journal entries
• Verifying daily credit card payment statements
• Updating the ERP with verified information

These manual processes were time-consuming and prone to errors, highlighting the need for a more streamlined approach.

What challenge did they encounter?

1. Reconciliation Control Challenges: The ERP system lacks a comprehensive controller view for effective variance analysis, operational tracking, and proactive measures. Better communication tools are needed to improve these processes.
2. Time-Consuming Month-End Process: Manual data entry, ERP uploads, and daily verifications of bank statements and prepaid journal entries are labor-intensive. These tasks take about 60 person-hours across 59 entities due to inefficient reconciliation and verification methods.
3. Approval Delays: The need for manual system logins by approvers to review and close ledger entries slows down the financial closing process.

What solution did they implement?

An advanced accounting solution helped them gain granular visibility into their accounting process, enabling full control from transaction data gathering to data processing to reconciliation. They reduced the person-hours involved by ~60%.

Let’s deep-dive into the features offered by this solution:

• Cash Clearing Reconciliation:

1. Data Handling: Automated GL Line Items and bank statement imports cut data processing time from 15 minutes to near-instant.
2. AI-Powered Matching: Rule-based automation reduced manual work and errors in transaction matching.
3. Seamless Integration: Direct posting of bank entries to Bank Clearing and GL accounts in the ERP System improved accuracy and speed while reducing journal rejections.

• Bank Reconciliation:

1. Enhanced Rule Configuration: A platform was provided for dynamic configuration and management of reconciliation rules, minimizing errors and ensuring consistency.
2. Efficiency Gains: The reconciliation process time was cut by 60%, significantly reducing manual labor and time investment.

[Case Study]Leading Wholesaler Achieves Seamless Reconciliation with 100% Coverage across 400+ General Ledger Accounts

This leading wholesale distributor of plumbing supplies operates warehouses across 30 U.S. locations, with exclusive showrooms in California, Oregon, and Hawaii. Accurate inventory and asset tracking is vital. However, their reconciliation process relies on manual data collation from multiple spreadsheets for over 400 accounts.

This approach, combined with complex ERP navigation and manual data integration, creates inefficiencies and increases error risk.

What challenge did they encounter?

1. Manual reconciliation prone to errors: Fixed Asset and Inventory Reconciliation processes involved numerous manual steps. These included aggregating multiple data reports, comparing data, and making adjustments—all of which increased the risk of errors.
2. Complex data validation: Preparers had to validate postings, compare fixed asset lists with trial balances, and ensure disposals were correctly accounted for. Inventory reconciliation involved comparing trial balances with perpetual inventory and stock transfer reports.
3. Continuous monitoring was reactive: Both processes demanded constant vigilance and updating of balances and records to ensure accuracy, consuming nearly 3–4 person-hours.

What solution did they implement?

An advanced Anomaly Management system was implemented to streamline Accounts Payable processes by integrating with historical General Ledger (GL) data. 

As a result of these improvements, the company achieved a 100% centralized single repository for auditory requirements, 100% reconciliation coverage, and approximately 75% automated fixed asset and inventory reconciliation using LiveCube.

Key features included:

• LiveCube: LiveCube is a no-code platform with an Excel-like user interface connected to a cloud database capable of handling millions of records.By utilizing a no-code platform with an Excel-like user interface connected to a cloud database capable of handling millions of records, they achieved 100% automated data aggregation for GL details from the ERP across all accounts.
• Integrated maker checker workflow: The integrated Maker Checker Workflow enhanced process control through checker segregation and improved accuracy.
• A closed system: The solution consolidated accounting processes into a single platform, streamlining data management and reconciliation. This automated system reduced manual effort, improved accuracy, and enhanced visibility across inventory and fixed asset accounts. The platform's centralized communication and AI-based features replaced fragmented systems with an efficient, cohesive accounting solution.

What can the Finance Team do to streamline the Financial Close Process

A robust financial close automation system will enhance efficiency and accuracy in monthly close processes. Such systems will integrate key components to streamline operations.

Future automated workflows will transform manual checklists into digital, streamlined processes. Advanced collaboration tools will facilitate real-time updates among team members, fostering improved coordination. Comprehensive audit trails will maintain detailed records of tasks, approvals, and journal entries, ensuring accountability and transparency in the financial close process.

Configurable close calendars will allow for customization of tasks and assignment of responsibilities, adapting to specific needs. Real-time dashboards will provide instant visibility into close status and potential risks, enabling proactive management of the financial close process.