It’s the 15th of the month, and the previous month is still not closed – financial statements are still pending. Today, it’s safe to assume everyone wants their information instantly, including the company stakeholders – who want to see their company’s financial information instantly.
As accounting leaders, we are continually striving for a quicker month-end close and earlier financial statement completion date, but how do you achieve this without creating stress on your accounting team with late nights of reconciling, balancing, posting journal entries, at the same time still produce accurate financial statements?
For many small to medium sized companies, financial statement preparation probably takes up to 30-40% of the month end closing process time.
According to an article on CFO.com, more than half of the respondents did not know the total cost of managing and publicizing their results, which means that the cost of producing financial statements is likely a hidden cost that management did not foresee as a factor to their bottom line results.(1)
Often this is due to the fact that the financial statements are Excel-based – which breeds several dimensions of tediousness.
Excel is not a financial reporting system, yet many accountants have tried to turn it into one. More then 70% of the 1,100 global executives interviewed in a survey by Oracle and Accenture said they used spreadsheets to track and manage financial reporting on a daily basis.(2)
Here are some of the consequences:
- Financial Statement Workbook Monster: When financial statements are designed in Excel, they are usually saved in a massive workbook with a myriad of linked worksheets, pivot tables and macros (especially in the case of consolidated financial statements). When an error occurs, it is extremely time-consuming to find the source of the error because of the complexity of the financial report design. The original intention of saving time by automating the financial report, results in more time taken.
- Data Inflexibility: Rather than a real-time connection to the ERP database, raw data is usually imported to Excel to a raw data sheet, and then linked to financial statement worksheets. A new record in the raw data can throw off linkages, which then requires manually and tedious updating.
- Complex Handover: Handing over an Excel-based financial statement to a new accountant is extremely difficult for the new accountant who has to understand how all the worksheets are linked, fields calculated, macros defined, etc…
Avoiding using Excel as a financial reporting system, is as simple as just buying a ‘real’ financial reporting system. However the initial thoughts on a financial reporting system usually come with a negative perception:
- It’s expensive
- It’s complicated
- I know what I’m doing in Excel
To calm these qualms, when you purchase your ERP there are several options for financial reporting systems that are “Excel-based” in that they work and like with Excel without many of the downfalls of a true spreadsheet based system. In addition, they are relatively inexpensive – and from my experience easy to use.
A financial reporting system can (including Excel like versions):
- Pull financial data directly from your ERP
- Automatically convert multi-currency entities to local currency with month end exchange rates
- Still drill-down to transaction level information
- Easily consolidate multi-entities, all in the comfort of Excel
- With a click of a ‘refresh’ button consolidated your financial statements automatically – updated with your current financial data from your ERP system
Further, some Excel-based financial reporting systems can double as a business intelligence reporting tool. They will allow you to access any table from your ERP database using pivot tables to easily create financial and other type of reports, with report parameters and calculated fields.
Financial reporting tools save a tremendous amount of time in:
- Exporting / importing financial data
- Searching and correcting errors
- Ensuring the accuracy of financial information
At the same time, there are those that still allow you to work in the comfortable confines of Excel and continue to use regular Excel functionality.
From past experience, using a proper financial reporting systems can cut the financial statement preparation time each month by as much as 50%, thereby allowing your accounting team to focus on ensuring accurate financial data in your ERP, since the financial statements are almost automatically produced.
The result is, a more efficient financial statement preparation process translates to a shorter month end close, and a less stressed accounting department. In the end, isn’t that what we all want?
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