Effective Close Management for Midsize Organizations

Did you know that 40% of organizations lose money due to poor accounting? Streamlining the close management process is crucial. If you find yourself racing against time during the month-end close or frustrated with inaccurate financial data, you’re not alone. Here are the most common problems finance teams face.

• Lack of structure and proper SOPs:

  In general, a lot of midmarket companies rely on their seasoned professionals who have in-depth knowledge about the process to take care of the accounting side of things. However, this whole manual process is not well documented and the operating procedure is not standardized. Strong standard operating procedures (SOPs) are necessary as organizations get more complicated, but gaining support for building SOPs can be difficult. 

• Race against time during month-end close:

  Important decisions in a company heavily rely on what the financial reports say. So, getting these reports done accurately and on time becomes a top priority. As there is a shortage of accountants in the USAThe number of accountants handling the tasks is less and thus this leads to late closure of books and late reporting. Even if the financials are reported on time it is inaccurate most of the time.

• Inaccurate financial data:

  All it takes to sabotage the entire financial close is incorrect or missing data from one department of the company. Every department generates purchase orders, invoices, and expenses. However, Mid-market companies face issues with data centralization thus there is a lack of documentation which is required for posting journals. Also, it happens that accountants face problems requesting documents from other teams and hence the closing of books takes more time. It leads to inaccurate close as there is no proper document to back up all the entries. 

• Silos and poor financial data integration:

  Finance teams suffer from siloed and diverse systems where data is stored across the organization. These ERPs and non-ERPs are not connected properly which means they often pull data very slowly and wrong. This implies that in addition to having to reconcile and make sense of different data, accountants frequently have to use labor-intensive, manual procedures to guarantee that the data is extracted and then organized consistently.

• Reliance on tribal knowledge and manual tasks:

  For the month-end close, the majority of businesses still rely on laborious, time-consuming, manual processes that might result in mistakes and oversights. The tasks are based on past procedures that are known only to the individuals who are accountable for finishing them. Using Excel to do the accounting process is one of them. Although Excel is still widely used in terms of modern accounting work it has not been updated. The format is prone to human error by design. According to industry studies, 90% of spreadsheets with more than 150 rows have at least one major mistake that can compromise business decisions and financial reporting. 

• Unaware of automation:

  The complexity of midmarket firms’ books increases along with their growth, not to mention the necessity to apply ever more stringent corporate security and governance standards. Still, a lot of firms in the Mid-market are relying on a bunch of senior people to close the books during month end who are not either not aware of automation or a bit reluctant to imply automation.

As for every lock, there is a key, the solution to the problems sometimes lies between the lines of the problems itself. Here is a helping hand for the finance teams to make the processes much more efficient. 

• Centralization of data: 

  Finance teams suffer from siloed and diverse systems of records across the organization, which frequently have various metadata or data formats for the names and numbers of accounts, goods, customers, divisions, and so on. This is in addition to the issue of wrong and delayed departmental data. This implies that in addition to having to reconcile and make sense of different data, accountants frequently have to use labor-intensive, manual procedures to guarantee that the data is organized consistently. It will be difficult to promptly retrieve the financial records needed for the month-closing procedure if they are kept in multiple places. Having a centralized system for the data will solve this issue. 

• Standardizing the process and protocol: 

  Create defined Standard operating protocols(SOPs) for the closing process to guarantee precision and uniformity. Part of this is creating detailed checklists and templates for each task. A checklist may be a huge help in the closing process since it makes sure that everyone follows the same steps, which reduces the chance of error. 

• Constant observation:

  Having a dashboard to track the close process and check workflow will provide both visibility and control. A dashboard like that will help an accountant to segregate their tasks and create a priority list which will result in increased productivity. This will enable a teamwide close process control to the managers. a customizable dashboard to track all the important metrics of the org and identify potential snags using automated reports will provide visibility to an accountant making their job much easier.

• Eliminate manual tasks: 

  The risk of human mistakes can be decreased by implementing financial software that automates time-consuming, repetitive operations. Data entry, reconciliation, and report preparation are some of those. Use instruments that combine data sources and financial systems. This lessens the need for human labor and facilitates effective data consolidation.

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Since the inception of AI, we have seen a lot of questions about it. Will AI replace our jobs? Is it a friend or foe? Let’s put it this way, AI is here to make your job much easier and streamlined. 

• Financial close automation system with continuous transaction matching: 

  Matching the transactions is one of the highlighting tasks that an accountant has to do manually, but it doesn’t have to be that way. With an automated financial close system AI can pull in all the data from the existing ERP perform the transaction matching automatically and segregate the data into different buckets. 

• AI for detecting errors: 

  The financial teams go through the same procedure each month, which involves applying a level of materiality and searching for faults. By using AI technology, errors, and unusual/out-of-sequence data/activity can be found and the materiality level can be lowered.AI can anticipate problems and recommend solutions, streamlining the closure procedure.

• Anomaly detection:

   During month-end close resolving Anomaly manually can be one of the biggest challenges. With the help of AI data from your ERP can be pulled to identify the anomaly such as incorrect GL posting or missing GL posting and make a list out of it. To resolve them AI can intelligently recognize the patterns of anomaly and suggest corrections.

  

HighRadius’ AI-based Record-to-Report solution enables faster Financial Close and accurate, automated Account Reconciliation. The hurdles an accountant has to face during month-end close can be dealt with through HighRadius’ AI ML-backed automation software. 

• Centralized data: HighRadius provides a bolt-on solution that sits right on top of your system of records and pulls data from there. It provides the organizations with a centralized data pool as it can work with multiple systems of records ensuring proper control and visibility of the close processes. 
• LiveCube task automation: LiveCube is a Spreadsheet-like Platform that automates business computations backed by big data. Having similarity with Excel means it is easier for accountants to use as they have already worked on Excel. The risk of error and manual work can be decreased with its templatized data processing. With Automated Data Rollover transferring GL balances and details to the next period is just a click away. 
• Transaction matching: A 90% match rate can be attained by automating GL data extraction from ERPs using HighRadius’ Transaction matching tool. Accurate matching across data sources enabled by AI/ML helps automate your reconciliation process. 
• Anomaly detection and management: The artificial intelligence (AI)-powered anomaly detection solution from HighRadius accelerates your reconciliation process by 30%. With the use of AI-based warnings for any anomalies, the solution automatically detects discrepancies and makes you compliant and audit-ready.To resolve them it can intelligently recognize the patterns of anomaly and suggest corrections.

Add a graphic here stating how HRC solutions can improve the close management process. 

Managing the financial close process can be overwhelming for midsize organizations, but it doesn’t have to be that way. By identifying common challenges and implementing effective solutions, finance teams can transform their month-end close into a smooth and efficient process.

Centralizing data, standardizing procedures, and eliminating manual tasks are key steps toward a more streamlined operation. Leveraging AI technology for transaction matching, error detection, and anomaly resolution can further enhance accuracy and productivity, making life easier for accountants and ensuring reliable financial data.

HighRadius’ AI-based Record-to-Report solution offers a comprehensive approach to close management, providing the tools needed to overcome the typical hurdles faced during the month-end close. With centralized data, automated transaction matching, and intelligent anomaly detection, your finance team can achieve faster and more accurate financial closes.

By embracing these advancements, midsize organizations can focus on strategic planning and data analysis, driving future growth and success.

HighRadius is here to support your journey toward a more efficient and reliable financial close process.