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Optimizing the financial close is no different from solving a problem—except, of course, that the people involved need to possess a certain level of accounting expertise. In simple terms, to solve a problem, one must identify the root cause, come up with potential solutions, and implement the chosen solution. In this video, I'd like to highlight what growing companies must watch out for at each stage.
Stage 1: Identify the root cause
The key to solving any problem starts with accurate identification of the root cause. This could entail interviews, inspection of documents, and a walkthrough of the process, accounting software, or ERP. For instance, what is the root cause of a delayed consolidation worksheet—is it really a manpower shortage, a competency issue, a lack of supervision and review, or poor project management? Circumstances differ, so critical thinking, experience and being open minded can prevent you from being superficial in figuring out the root cause.
Stage 2: Generate potential solutions
At this stage, the risks, pros, and cons of each potential solution are presented, along with the estimated cost of implementation and resources needed. The assumptions behind the potential solutions identified at this stage might only be valid for a certain time period. For example, a software upgrade might have been expensive a few years ago but may become a cheaper solution as time passes.
Stage 3: Choose and implement the right fix
After carefully evaluating all the risks, benefits, and consequences of the possible solutions, it is now time to choose and implement the appropriate one. Some may opt for a temporary band-aid solution until circumstances permit a more fitting solution. Companies need to allot reasonable time and resources for implementation—otherwise, even a good solution may fail.
Third-party assistance can be involved in all or any of the three stages of optimizing the financial close. Factors that help growing companies decide whether outside help is necessary include capacity restraints, cost considerations, and the need for unbiased views and fresh eyes.
If you're looking to optimize your close process and need finance function guidance, contact VMC.
VMC's views are general insights—not one-size-fits-all advice. Every company's situation is unique.
