Speeding Up The Close

"Speeding up the close"

The article I choose to review is "Speeding up the close" by Gaye van den Hombergh and Laurie Streling from the magazine Financial Executive June 2004 issue.

Companies with a 12-month accounting period otherwise known as a fiscal year are coming up with alternative ways to reduce time and speed up the process to meet the impending 60-day deadline. This article discusses fiscal year and the abilities of companies to close the books quickly to access real-time financial results, which, in turn, lead to better decision making. Companies spend or invest funds in projects that hopefully make the firm more profitable, having real-time financial results would make this more efficient. Faster closings means more time for the company to process the numbers, also a rapid close is a sign of the efficiency and success of management and the company. If management has real-time financial results it allows them to respond more efficiently to changes in the market, which, in turn, help investors make significant investment decisions.

The article goes on to discuss the pressure mounting for virtual close, but how urgent is it, and is it worth the investment? A survey was conduct of financial executives in companies to see if the pressure mounting for virtual close is significant often to proceed with further action. The Johnsson Group found less than one out of five respondents reported a fully automated close, more than half said that their close process is semi-automated and requires some manual intervention, and a quarter replied that their systems need significant manual intervention. Speed up the close should not be viewed as a vital step to be taken all at once, but as an evolutionary process. The concept of virtual close shows us how far the finance organization have come in the pass couple of years in the time it takes to performing closings. Two-thirds of companies closed their books for the quarter in 4 to 7 business days, 16 percent are accomplishing their closings in 1 to 3 days, but on other hand 21 percent of the companies reported needing more than 7 business days for closing. Although companies have to be prepared to confront certain issues while obtaining faster closing, like less emphasis on training, leaving companies with fewer finance "historians who in fact know the rationale behind the processes and have a deeper understanding of the business".

The next paragraph in this article discusses a more strategic role for finance. Transformation forwards the virtual close all depends on the company and industry.

For many companies the cost to employ the systems and technology that for the virtual close is too great of a venture for the immediate future. As companies are creating a detailed outline to more strongly align finance's involvement with the business strategy to enhance their competitive edge. Companies acknowledge accelerating the close