6 Must-Haves for a Modern Financial Close Solution
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Finance and accounting teams that want to choose the best financial close solution to enhance their consolidation, close and reporting process need to know what to look for. In a webinar we hosted with with BPM Partners and Delbridge Solutions, and now available on demand, we called out the following:
- True out-of-the-box functionality such as preconfigured logic
- Ease of use, but also ease of ownership such the ability to select preconfigured rules and consolidation logic preselect rules
- The ability to continue using Excel as a front end while overcoming its limitations
- Workflow and collaboration features that allow finance to own the process
- Transparency and auditability via standard data modeling
- Depth and breadth in terms of handling the biggest complexities in finance
When Craig Schiff tries to envision the future of financial consolidation and close, he has two sources to draw upon.
One obvious source is hard data. As the CEO of BPM Partners, Craig and his team have been conducting critical research on financial technology and its adoption patterns for two decades.
Another source, however, is the conversations Craig has with finance chiefs at other companies. And in the webinar we hosted together, one company in particular came to mind:
“Many companies are growing. I was working with a customer recently that has 100 subsidiaries,” Schiff recalled. “In a couple of years, though, they expect to have more than 500 subsidiaries — which means they need to be able to handle more data and more users.”
“I was working with a customer recently that has 100 subsidiaries. In a couple of years, though, they expect to have more than 500, which means they need to be able to handle more data and more users.”
Craig and the BPM Partners team have taken those anecdotal customer stories and used them to inform their research. You can see his full presentation in the on-demand webinar, The Pulse of Financial Close & Consolidation, co-hosted with our VP of operations Guy Menard and Delbridge Solutions co-founder Harjot Gai.
Beyond the value of the data itself, what followed was a fascinating and wide-ranging discussion about what a “modern” financial consolidation and close software should look like.
What The Data Says About Finance Wants And Needs
The most recent BPM Pulse survey (the 18th edition) shows, for example, how the needs of financial close solutions are evolving.
A majority of those BPM surveyed, (58 percent), said they need consolidation capabilities during their budgeting, planning and forecasting. It's no surprise when you consider how timely, trusted actuals factor into the process.
What capabilities do they need? The top answers says Craig, in order of priority, are as follows:
- intercompany eliminations
- management rollups
- geographical or product rollups
- posting journal entries
- currency conversions
While purpose-built financial solutions are readily available, BPM found 21% of firms are using an ERP system to handle these functions. A quarter have moved to a cloud-based platform, a quarter have stuck with an on-premise solution, and 22% still rely on Excel spreadsheets.
“That’s okay, I guess if you have a single ERP or general ledger. But many people do not,” he said. In fact, 50 percent of companies have two or more ERPs in place, according to BPM Partners.
Core features aren’t the only factor that could lead companies to reconsider the platform they use for consolidation and close. BPM also asked finance leaders what kind of attributes a solution should have. Besides integration with existing applications, ease of use is critical.
“I don’t care about how feature-rich it is. If I can’t figure out how to use it — if I have to go to a class or open up a manual – it’s not happening,” Craig said.
“I don’t care about how feature-rich it is. If I can’t figure out how to use it — if I have to go to a class or open up a manual – it’s not happening.”
What makes a modern financial close solution?
Guy Menard, Fluence’s VP of operations, got even more specific about how finance and accounting professionals can select a truly modern financial close solution.
Here's his list of six must haves:
1. Out of the box functionality
Although many vendors might make this claim, “out of the box” should not refer to so-called starter kits, Guy said.
“Templates are great at fast-tracking the implementation — they’re much better than a blank sheet of paper — but in the end they get you to a place where things are highly customized, difficult to maintain and very costly,” Guy pointed out.
Instead, check for pre-configured logic that’s available inside a solution, owned and maintained by the vendor. Guy said. This kind of logic is not only built but tested and deployed through the cloud. The benefits include increased reliability, performance and scalability, stability and upgradeability.
2. An expanded notion of “easy”
For Guy, that means not only easy to use, but ease of ownership and maintenance. The best consolidation and close platforms allow finance professionals to create or edit existing rules. This should be doable without coding, or relying on IT.
“Easy means not only easy to use, but ease of ownership and maintenance. The best consolidation and close solutions allow finance professionals to create or edit existing rules - without coding or relying on IT.”
“Modern tools will have a graphical user interface that you can use to preselect the rules that apply, and you can change the rules based on your specific requirements,” he said. You should also be able to add new rules as the needs emerge.
As your business grows and evolves, meanwhile, a modern financial close solution should allow time-based stamps and hierarchies to address changing ownership rates or consolidation methods. Time-stamping calculations will reduce the overall maintenance of the application, Guy added.
3. A way to address Excel’s limitations
BPM Partners’ research shows 84 per cent of those who deploy performance management technology continue to use Excel anyway. So why fight it?
“Modern tools have embraced Excel as opposed to trying to replace it,” Guy said. “They’ve baked in all the features, all the functions that make Excel a usable part of the solution.”
But they also include adult trails, version control and user permissions, among other financial controls.
The benefits here are an extremely low learning curve, so people are able to use a solution right away, coupled with the controls you need to so everyone trusts the numbers you report.
4. Workflow and collaboration
“As a manager or corporate controller, workflow is an easy way to know where you are in the close process, where (and with whom) any bottlenecks might be and how to clear them,” Guy said.
This means automation to offer pre-calculated numbers for the next person who has to review the numbers, for instance. You should be able to track progress with calendaring and dashboards.
Rather than collaborating through the usual ways — like email and phone — Guy suggested modern solutions would also mesh with tools like Microsoft Teams and Slack.
Collaboration like this is a great way to reduce the time it takes to complete the financial close, which Craig has already shown is an ongoing challenge for many firms.
5. Transparency and auditability
In the past, you had to be pretty judicious about adding dimensions due to concerns over performance, memory or CPU. That’s changed, Guy said.
“Modern financial close solutions have built-in data modeling specifically designed for consolidation,” he said.
“Modern financial close solutions have built-in data modeling specifically designed for consolidation.”
This includes an audit dimension to find out exactly where the numbers are coming from. And a movement dimension, which allows for full continuity of all your balance sheet accounts.
Another dimensions could address intercompany matching, reconciliation and elimination.
6. Depth and breadth
Much like “ease of use,” “feature-rich” can mean a lot of things to different people. Guy said truly modern platforms have a breadth of advanced capabilities to handle the complex stuff.
Tools to manage acquisitions and disposals are important, for instance, as are tools to deal with partial ownerships, cash flow and time-based calculations.
“Depth,” in this case, should include a detailed cumulative translation adjustment (CTA), as well as tiered translation as you go from U.S. dollars to Euros and then British pounds, for example.
Can you look at multiple currencies to support sub-consolidations? What about constant currency reporting so you can remove the impact of foreign exchange when you’re analyzing actuals versus budgets? Make sure all these questions are answered before you move forward.
In terms of “breadth,” reporting capabilities are an obvious must have for any new software you’re considering. BPM’s research backs this up, with 69% of finance leaders citing financial reporting as a key requirement in any financial close solution.
How to avoid disappointment
Besides Craig and Guy, the webinar provided on-the-ground insights from Harjot Gai, co-founder and COO of Delbridge Solutions. As a Fluence partner, Harjot and his team have seen firsthand what can happen once a consolidation and close solution implementation is complete.
It can often be a matter of managing expectations.
“Clients want solutions that are quick to use, where reports open very quickly and the consolidation process runs in a very reasonable time,” he said. “Some solutions in the market are more scalable and robust than others.”
He recommended double-checking that you’re considering a modern financial close solution that offers:
- Prospective and retroactive changes to entry structures
- Extract, transfer and load (ETL) capabilities that can handle the complexities of the import process from different data sources across your business
- A solution design that’s not so complex that you have too many dimensions, where data will be difficult to maintain.
The big thing to avoid, he said, is customization. “Customizations could break in the future when you upgrade, and they’re more costly to build and maintain.”
“Consolidation has to be configured to your unique needs, but the processes are fairly standard. They should be prebuilt. You shouldn’t have to code this or create them from scratch.”
Craig echoed those sentiments.
“Consolidation has to be configured to your unique needs, but the processes that take place in consolidation and close are fairly standard,” he said. “They should be prebuilt. You shouldn’t have to code this or create this from scratch.”
Check out the full on-demand webinar for more insights from Guy, Craig and Harjot about the keys to successfully selecting a modern financial close and consolidation platform.