Dive Brief:
- Nine out of 10 (94%) of controllers put high energy and resources into closing company books but could curb deadline pressure and the risk of error by revamping the structure, operations and behaviors underlying how their team completes the closing, Gartner found in a survey.
- “We’re not just doing what we’ve always done but speeding it up,” according to Hilary Richards, vice president, advisory, at Gartner. Instead, “we’re trying to do it better, which means we need to think about doing it differently.”
- A controller can streamline closing by trimming the frequency of “low-risk work” and subjecting steps in the closing process to “materiality thresholds” that remove tasks altogether, Richards said Tuesday in a presentation at the Gartner CFO and Finance Executive Conference at National Harbor, Maryland.
Dive Insight:
A “high effort” closing imposes costs beyond a stressed, overworked staff, including broken timelines, excessive revisions to ensure accuracy and an inability to take on unexpected work without missing deadlines or risking errors, Richards said.
“It’s a pretty universal problem,” she said. “Close activities always take us longer than planned and again, we plan sometimes for some pretty long hours during the quarterly close.”
Controllers and their staff aiming to strip away unnecessary work need to overcome a “compliance bias,” Richards said, while acknowledging that the benefits of eliminating some tasks are not clear.
“There’s this inherent barrier that a lot of us take when we think about compliance-driven, deadline-driven regulatory types of activities,” she said. “We believe that nearly all of the activities are required, that some of these compliance activities are critical for strong controls, so they’re essential — they can’t be eliminated.”
Teams involved in closing the books also need to step back and consider different ways of doing the work, she said. “We just think it’s easier to keep doing it the way we’ve always done it, but the reality is our legacy processes and biases can obscure opportunities to change and improve the process,” she said.
When preparing for a closing, controllers primarily focus on the total volume of work, the extent of manual tasks and the complexity of the process design, Richards said.
Yet in order to streamline a closing, controllers should focus more on their staff’s willingness and ability to innovate, any fragmentation in the technology and the total time available, she said.
“We get comfortable with the current process even if it drives us crazy,” she said. “I know it’s going to take me ‘X’ amount of hours — let’s just get to it and move on.”
Such deadweight exists in the mind, not in the computer’s hardware or software, Richards said. “Even if you buy the new shiny, fanciest technology, it could be some of these behavioral drivers that are still a drag on your process.”
