It takes most companies between three days and a full month to “close out” their books, or zero out their income and expense accounts to determine net profit (or loss) and reconcile their balance sheet accounts. Depending on which financial system they’re using, these companies are spending an inordinate amount of time on a process that could more easily be managed on a continuous basis—versus one that has a defined beginning, middle and end.
According to an APQC General Accounting Open Standards Benchmarking survey, the bottom 25% of companies take 10 or more calendar days to perform the monthly close process. The top 25%, on other hand, can wrap up a monthly close in just 4.8 days or less—roughly half the time of the bottom 25%. Companies that use continuous close are not only spending less time on their books, but they can also allocate resources to more important projects.
5 Reasons to Use Continuous Close
For the company that makes decisions based on a combination of financial and non-financial information, for example, continuous close essentially modernizes a process that’s been associated with long days filled with cumbersome and stressful financial accounting processes.
Here are five more reasons your clients should be using continuous close:
1. Enable continuous monitoring of critical business information. There was a time when company executives could wait until the end of the quarter or financial reporting period to learn how their organizations were performing. This doesn’t work in the modern business world, where information needs to be up-to-date, user friendly and real-time where possible. By designing a process for continual monitoring of critical business information, organizations can gain competitive advantage through better, faster, fact-based decision making.
2. Leverage the power of advanced technology. Technology and the ability to process massive amounts of financial and non-financial data is an important element in continuous close. With market leading financial solutions, all information from the front office to the back office can reside on a single, unified platform that all stakeholders can access 24/7/365.
3. Monitor the pulse of the company in real-time. Closing the books requires finance departments to perform detailed financial analyses, a process that’s largely spreadsheet-based, decentralized and siloed. Using NetSuite’s cloud based enterprise resource planning (ERP) system, the same data can be posted and attached to the appropriate records and/or transactions. Both internal and external stakeholders (e.g., auditors and regulators) can click through to view the documentation behind the analysis and get their questions answered. Key stakeholders can leverage their respective dashboards to “monitor the pulse” of the company for the areas that they’re responsible for.
4. Extend the continuous close to “continuous compliance.” Accurate and timely financial data is vital for compliance with statutory requirements, including Sarbanes-Oxley; federal, state and local tax reporting; and cumulative translation adjustments. When reporting is required for third parties (i.e., a bank for covenants or a landlord for lease requirements), companies can build custom reports and have them automatically emailed to the appropriate compliance partners.
5. Reduce audit fees. When current financial information is available on a real-time basis to the third parties that require it, auditors can just log into NetSuite and retrieve their transactions and reports for audit testing year-round. And because the majority of the audit work is completed off-cycle, you can reduce your clients’ their audit fees while providing services at a lower internal cost to you and avoid last-minute scrambling.
Always be Closing
Whether they’re selling products, services or both—and whether the transactions take place at a single point in time or across different milestones—companies are using continuous close to deliver accurate and real-time analysis of their financial performance around the clock. With continuous close, your clients’ finance departments will always be in “close mode.” Even better, these processes will be churning away in the background, leaving financial and accounting departments to focus on more important projects.
If you'd like to learn more, join us for the webinar "The Case for A Continuous Close" on January 16, 2020 and "Graduate Your Customers onto NetSuite to Scale Your Business" on February 4, 2020.
Author Bio: Tom Kelly is the Sr. Director of Product Marketing and Management for Oracle | NetSuite. Before joining Oracle | NetSuite Tom founded T-Edward, a strategic and operational Cloud consultancy providing Cloud expertise and CXO services from companies in the Fortune 500 to start-ups. Prior to T-Edward Tom held a variety of executive positions with large cap companies including PepsiCo, eFunds and Deluxe Corporation, as well as small cap, privately held entities such as eBenX, FullContact and PeopleNet Communications. Tom is a CPA and holds a B.A. degree in Accounting from North Carolina State University and an MBA in Finance from Fordham University.