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Summary
Ventana Research recently completed “The Fast, Clean Close,” a primary research study sponsored by Longview Solutions. Respondents to our research survey consisted of 424 validated participants who work in companies that have more than 1,000 employees. Almost all respondents had finance department titles. The results point to the need to make closing faster a priority and demonstrate as well why using the right software is a vital component to achieving this goal. The software that companies use during the close affects the speed, accuracy and quality of the process. Larger corporations, particularly those that have enterprise resource planning (ERP) systems from multiple vendors, close substantially faster when they use dedicated consolidation applications rather than spreadsheets or the consolidation capabilities of an ERP system. We also found that companies that are heavy users of spreadsheets in the closing process have more problems with data quality in preparing the financial statement than those that limit their use. Overall, the results of the research suggest that companies looking to shorten their monthly or quarterly close or both are likely to find that focusing on software and process issues will produce the best results.

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One of the important issues highlighted by our research on how companies can accelerate the process of closing their books, which also was sponsored by Business Finance, the Institute of Management Accountants and Technology Evaluation Centers, was the importance of using the right software – and of not using the wrong software. We discovered, for example, that companies that use dedicated consolidation software typically close their books sooner than those that use spreadsheets or their ERP system to manage the consolidation. According to our report, nearly two-thirds (65 percent) of companies that use a dedicated consolidation application are able to close their books within five or six days, compared to 44 percent of those that use desktop spreadsheets to manage the process and 58 percent of those that use their ERP system. The same pattern applies to the quarterly close: 53 percent of companies that use consolidation software close their books within five or six days of the end of the quarter, compared to just 38 percent of those that use spreadsheets and 44 percent of those that use their ERP system. We think one reason for this is that a majority of the companies in our research have multiple ERP systems, operate internationally and have multiple accounting entities. Consolidation software is designed to address the needs of these sorts of companies, particularly in bringing together the results from multiple accounting systems. Yet just one-third (32 percent) of all companies in the study and only half of those that have ERP systems from four or more ERP vendors use consolidation software.

If they are interested in shortening their close, companies need to use desktop spreadsheets less. Based on our research data, we estimate it takes companies that use spreadsheets to manage their process 30 percent longer to close their books than those that use dedicated consolidation software. Not only is it more difficult for these companies to close quickly, they also take longer to complete the accounting cycle than those that use other methods. While more than one-third of companies that use spreadsheets to manage the process take 11 or more days to finish their quarterly close, just 18 percent of users of dedicated consolidation software take so long.

Beyond the issue of speed is quality; after all, the objective is a close that is both fast and clean. We asked research participants to what extent data quality or data consistency is a problem in preparing their company’s financial reports. While a majority of companies have some issues, they are more pronounced for those that use spreadsheets. More than one-third (38 percent) of respondents from companies that use spreadsheets to manage the closing process said the problem is very significant, compared to just 29 percent of those that use consolidation software and 32 percent that use their ERP system. We also asked to what degree companies use spreadsheets in the close, regardless of which kind of software they use to manage the overall process. About two-thirds of respondents said they are heavy users of spreadsheets in the closing, while just under one-third (27 percent) said their use is limited. Three-quarters (74 percent) of the heavy users of spreadsheets in the close said their data quality or data consistency is a significant or very significant problem, compared to half (52 percent) of those that limit use.

As anyone who has spent hours searching for the source of a reconciliation problem can tell you, quality and speed are interrelated. We asked participants to estimate how many days they could shave from their close if they eliminated all errors. More than half (60 percent) said they could save at least one day and one in 10 said they could save three days or more. Only about one-quarter (27 percent) think the impact is minimal (less than one day). Desktop spreadsheets are an excellent tool for personal productivity tasks and ad-hoc analysis, but they were not designed for use in collaborative, repetitive corporate processes. Companies that want to accelerate their closing process need to find other ways to automate calculations and pass data from one system to another.

Assessment
Companies that take more than a week to close their monthly or quarterly books should be looking for ways to speed up their closing process. We recommend they look first at their process and the software they use to support the process. Using the right software to manage the task is important. Whereas companies with ERP software from a single vendor and a simple corporate structure probably will find their ERP system is the best choice for managing the close, those with systems from more than three vendors that do not use dedicated consolidation software should consider that option. About half of the companies in our study use such software to manage the process while the other half do not, suggesting that there are many companies that ought to consider this option. In addition, companies need to limit their use of spreadsheets in the closing process because spreadsheets can cause problems in data quality and consistency. Remedying this means doing more of these repetitive functions within enterprise systems and increasing direct data feeds from one system to another.