What Is a Connected Financial Close?
Many financial close solutions on the market today are, by their very nature, what I would consider ‘connected financial close solutions.’ What does this mean? Well, the solutions include separately created applications for different parts of the close process, which have to be connected when used together. Why is this? The reason is pretty simple—when expanding financial close offerings, many vendors built or bought fragmented, point solutions, which means customers end up using different technologies, different interfaces, and sometimes different physical locations to store data.
Still, connected sounds good, doesn’t it? Does this not mean that all processes are aligned, and that data can easily be moved between them? Not Really! In this case, connected implies there are several separate applications or instances which need to be integrated to communicate with each other.
Why Move Away From Connected?
There is now a compelling argument to transition from connected to a fully unified CPM platform for financial close, consolidation, reporting, and more. What’s the difference? With a unified CPM platform, all the processes are handled within a single instance. Plus, data is loaded into one central database and immediately made available to all business processes, so there are no manual data movements or reconciliations to perform.
Need proof? Below are four real-life examples of why organisations are moving away from connected financial close solutions to unified platforms:
1 – Lack of Accuracy and Consistency
One Global Financial services organisation recently explained their move to a unified financial close solution. They suffered from a lack of accuracy and consistency between their line-of-business results, group results, and the general ledger (GL). This situation caused many embarrassing moments in meetings and too much manual effort to reconcile. Year-end closes had become a frantic scramble with multiple panicked phone calls to IT to help fix urgent issues.
All the workload and overtime required to generate accurate and consistent numbers without the need to continuously restate the results was draining the Finance resources and leading to high levels of attrition in the team. Overall, the organisation was severely lacking automation. They were heavily reliant on manual processes where the time to react to any changes was too long – leaving them exposed to poor decision-making and missed opportunities. Moving to a unified financial close solution has changed the lives of the finance team and given the organisation some much needed confidence and consistency in their numbers.
2 – Too Many Reconciliations
A global media organisation found themselves using four separate consolidation applications and three separate data-loading applications simply to satisfy the different business models and therefore the dimensionality of their businesses. They were suffering from version issues for the databases behind these multiple systems, resulting in synchronisation issues and numbers often showing differently in the separate systems due to the delays. In this multitude of systems, the organisation still lacked a tool to assist with reconciling out-of-balance transactions – and adding another tool to the existing technology would have complicated the system landscape even further.
Ultimately, the realisation that the upgrades to these multiple applications were both time-consuming and expensive led the team to seek a unified CPM platform. Doing so allowed them to effectively eliminate the ‘hidden administration layers’ of having multiple applications for tasks such as making metadata changes, designing reports, and moving data.
3 – Missing Functionality
A global agribusiness found themselves missing key functionality, including the ability to handle master data alignment. This situation resulted in differences between systems and processes which could not be reconciled. For instance, the consolidation system was different than the tool used for budgeting and planning, which meant users were struggling with adoption and found reporting across the organisation to be both disjointed and difficult. There was an urgent requirement for more synced processes and enhanced reporting across all functions.
On top of that, the organisation regularly required new capabilities to handle their growing and changing business model. They were faced with purchasing additional add-on modules, which would deliver yet another interface and yet another location for storing and integrating data across the processes. The Finance team felt strongly that they needed a single unified CPM solution that could handle all of their requirements – old and new – but which also gave them the flexibility to expand and change with their organisation going forward.
4 – Unable to Handle Increasing Complexity
With divisions and business units in shipping, freight transportation, and port management, a global integrated logistics company is naturally a very complex business to bring together at a group level. This organisation had continued to add consolidation applications to the point where they had 11 in total. Of those, seven applications were to report according to IFRS standards and four were for rolling forecasts. The large team found themselves constantly pushing changes between applications, leaving very little time for validating data or strategizing on key business issues. Not to mention, upgrades for the applications were taking 3-4 months per application, which was unacceptable for the business and resulting in impossible periods of downtime and unnecessary delays in reporting.
The organisation also had a very large number of complex leasing arrangements, which brought additional challenges when the new IFRS16 lease accounting rules were announced. Adding these challenges to an already exhausted workload was simply not possible, so the organisation had to find an alternative. This organisation has now successfully made the move to one single consolidation application for their entire complex organisation.
Reasons for Change
The pace of change is leading to a corresponding explosion in the number of Finance Transformation projects. Indeed, most Finance leaders are now realising they cannot continue to respond with yesterday’s technology. They urgently need to move forward and drive the performance of their organisations at speed.
Even more importantly, Finance teams must also find ways to move beyond the traditional month-end financial close cycle. Enter financial signaling. With this capability, analysing revenue, costs, cash flow and operational signals on a weekly or even daily basis is no longer just a vision — it’s now essential to navigate rapidly changing business conditions
A fully unified financial close process and system combined with financial signaling (see Figure 1) provides a unique opportunity for Finance and Accounting teams. How? The process allows them to re-imagine the financial close and challenge the mindset that key data cannot be available before the books are closed.
Figure 1 – Fully Unified Financial Close
Here are just some of the benefits that come with moving from connected to unified:
- One software, one application for consolidation, planning, and reporting needs across an entire organisation with extensibility to handle future growth and change
- Performance improvements thanks to control, consistency, and overall process visibility
- Lower cost of ownership by replacing multiple software packages and integration points with one unified platform
- A Finance function that shifts to a strategic role by providing valuable analysis and influencing decision-making across the organisation
The Better Alternative – A Unified Platform
Organisations today should look to a truly unified platform for all their performance management processes. An intelligent Finance platform (see Figure 2) that allows organisations to break away from the limitations of spreadsheets and connected financial close solutions. A platform that unifies financial consolidation, planning, reporting, and analysis through a single, extensible solution.
Figure 2: OneStream’s Intelligent Finance Platform
To learn more about how you can re-imagine the financial close with the unrivaled power of OneStream’s Intelligent Finance Platform, download our whitepaper. And don’t forget to tune in for additional posts from our Re-Imagining the Financial Close blog series.