Trouble arrives when companies let their process strategies fall by the wayside and they err in their financial reports. Share prices may take a hit because “markets don’t like to be duped by anomalies that can’t be explained,” says Darren Heffernan, CFO of software-solution company TrinTech.
Shareholder suits may follow if the mistakes are material to the company and it’s forced to restate financials. Further, finance departments will be burdened by having to re-do the reports, and the company may incur added cost and complexity if it has to hire a third party to audit those numbers again. Finally, a restatement can be career-ending event for the CFO or controller. “Who would want to employ a CFO who made a material mistake and had to refile their account?” he asks.
When problems run rampant, talent-management and human errors could crop up. If the finance staff is burned out from late nights and intense workloads, they are more prone to human error. “They’re not just spreadsheet jockeys,” Driscoll says.
Because the close heavily involves human capital, companies need to evaluate skill sets and figure out where gaps are. Executives can shift less risky activity to lower-level staff, freeing up top talent to focus less on reporting historical outcomes and more on high-value activities, including forecasting and being involved in strategic decisions, Cheney says.
To be visible and transparent during the financial close, companies should invest in technology that can help automate the close-to-disclose process, including specific close-automation solutions such as Blackline, Chesapeake, Redwood and TrinTech software, he says. Such applications can assist in scheduling, managing close activities, reconciling financial accounts, processing inter-company activity and preparing and publishing external financial statements.
Although automation can relieve some of the human factor, it can be an albatross in its own way. The more things are automated, the harder it can be to update the system, and the more a real person may have to update it by hand.
“The technology alone is not a silver bullet,” Cheney says. “These initiatives require a balanced focus on people, process and governance in order to truly realize each application’s full value.”