A new report has discovered high volumes of undocumented processes and manual activities in the financial close procedures of 56 Global 1000 companies.
By automating processes involved with the financial close, manual activities could be reduced by 70%, the research found. This translates into annual tangible savings of £2.34 million for the average Global 1000 company, while companies with more than 80 legal entities could save as much as £3.93 million.
Redwood Software’s assessment of these large organisations, which were using SAP applications, highlighted a significant gap between current perception of the financial close process, its reality, and the best practices that can be achieved through process automation.
The research revealed that Global 1000 enterprises have an average of 83 separate legal entities and expend 142 full-time equivalents (FTEs) to complete the close.
With the financial close typically taking seven days to complete for each individual legal entity, companies dedicate more than 8,300 full personnel days to the close every year.
Digging deeper, research also shows that the close is highly dependent on manual tasks, application customisation and undocumented processes.
It found that 82% of financial close activities are completely manual, while 17% of the transactions required to complete the close rely on custom-built code outside of main SAP applications.
Up to 23% of financial close transactions that are formally documented are never actually executed, the report disclosed.
According to KPMG: “For years, CFOs have been struggling with their processes and models in an effort to deliver faster, more accurate and more insightful analysis and reporting while – at the same time – appropriately managing risk and reducing cost.”
Beyond the cost benefits of reducing the effort to perform and maintain the close, automation also mitigates risk. Automation eliminates much of the risk from human error and undocumented processes, which improves compliance and auditability.
One of the ‘Big Four’ accounting firms commented: “When companies apply automation to repeatable financial processes that support the close, CFOs get better quality information, faster. Automated close processes require less effort and costs less to execute.”