Close Management Software: The Next Must-Have FinTech for Accounting
By Chris Sluty
Every day, organizations are turning to technology to automate time-consuming, manual processes. For accounting teams, more and more are turning to close management software to address the pain of the month-end close. With new applications designed specifically to help streamline the close process, controllers and their teams can close their books faster and more accurately, while lowering their audit costs and improving job satisfaction.
Close Management Software is an emerging category within Financial Technology (commonly referred to as FinTech), which typically combines collaboration, reporting and process management together into a single solution, providing one place to manage the close process. It integrates with General Ledger (GL) systems, including cloud-based systems such as NetSuite or Intacct, or other enterprise systems like Oracle and SAP, so account reconciliations can be automated. This not only saves hours of the typical staff accountant's time, but also avoids the errors inherent in the manual tick-and-tie process.
Month-end is managed by the controller, who assigns work to the team and uses an Excel checklist to track completion. They ensure everything is on schedule by getting periodic updates from the team and holding status update meetings to make sure everyone is communicating. Once all of the close tasks have been completed and journal entries posted, it's time to ensure supporting documents tie-out to the trial balance. The tie-out and reconciliation process can be very time consuming, typically requiring someone to dig through a workbook to find any reconciling items.
For most companies, the month-end close requires managing numerous moving parts. Close Management Software works by connecting process, people, documents and reconciliations. When logging in for the first time, a staff accountant can see what has been assigned to them. They will have access to last month's checklist, know who performed the tasks, and can reference the supporting Excel files. In addition, they will be able to see deadlines so they can prioritize their work. They won't have to waste time looking for files: everything is placed in the folder related to accounting process and saved in the same manner each month. If a task is documented as an annual process, users know exactly where to look when it comes time to complete it. In addition, when auditors arrive on site and ask for documentation from a prior period, supporting documentation needed is easily accessible, even by those parties who didn't perform the work.
Close Management Software also greatly assists in the review process. The review process is slowed down by a lack of centralization - Excel checklists track procedure completion, but the documents related to those procedures are typically saved in a folder somewhere else. A major benefit of Close Management Software is its centralization of processes and supporting documents. By saving supporting documents directly with each accounting process, it prevents one from having to search through folders to find the necessary file. Simple organizational features will guarantee that closes will be managed consistently month over month. Once there is a system in place, days will start coming off the close, and the time to close will happen faster. In fact, in survey released in January 2017 of accounting and finance professionals, more than half those organizations surveyed using close management software were able to reduce their close time by one week.i
Audit support is also an area where Close Management Software proves its value. Nobody likes a provided-by-client request. The audit request process can be time consuming, especially for departments that aren't the most organized. The software will make your audit much easier. It organizes audit documentation and facilitates communication with auditors. Less time spent on your audit results in reduced audit fees and more time for staff to focus on closing the books and preparing filings like the 10-K.
Sarbanes Oxley (or SOX) compliance is also an area where Close Management Software can prove beneficial. For public companies, part of every audit along with segregation of duties, in preparation and review, is essential for minimizing audit risk on the way to an unqualified opinion. The software will help accounting departments document their processes, internal controls and sign off dates. Auditors will request walkthroughs of accounting functions and with Close Management Software, it is easy to facilitate these and show historical data that supports internal controls.
As technology and business progress, new enterprise software applications are built to help address pain points and inefficiencies. In the accounting world, there was a clear problem in managing data and producing accurate financial statements, hence the development of general ledger software. Close Management Software is the next evolution in accounting software. Not only do accountants want to produce an accurate financial picture, but they also care about doing this efficiently with the entire department collaborating. Over time, general ledger software has advanced to help with many facets of the accounting function, but for the most part has neglected the project management aspect of the monthly close. Close Management Software bridges that gap for management and finally provides a tool that puts the close process at the forefront.
i Chaos of the Close: A Survey of Financial and Accounting Professionals, January 2017, Dimensional Research.