Financial Close and Consolidation

What’s F&A’s Role in Responding to Instability & Volatility?

May 4, 2023 by Revelwood

This is a guest post from our partner BlackLine, detailing the results of its annual survey of global F&A leaders.

War in Eastern Europe. Global inflation. Ongoing supply chain issues. Just one of these is enough to cause serious impacts on business—and currently, the world is enduring all three, along with countless other local and regional economic disruptions.

While Finance and Accounting (F&A) has a reputation for remaining calm and pragmatic in a crisis, it can be overwhelming for these departments to help steer their organizations through difficult times while keeping up with their day-to-day work. BlackLine wanted to hear directly from F&A professionals on how they’re feeling about these issues and more.

Survey Results of F&A Executives & Professionals

In a survey of 1,483 C-suite executives and F&A professionals in medium and large companies around the world, BlackLine discovered not-so-rosy outlooks and insights including:

Nearly two thirds (63%) of all respondents said they expected a worldwide recession within a year
Almost all (95%) expect rising interest rates to have an impact on the way their business operates
More than six in ten (62%) C-suite and F&A professionals predict that their companies’ financial reporting will come under increased scrutiny over the next year

Whether or not these results surprise you, they beg for real solutions and actionable ways to address them.

Trust (or Lack of) in the Numbers

Since 2018, our surveys have shown C-Suite trust in the accuracy of the financial data at their companies has fluctuated from a high of 71% in 2018, dropping to 58% in 2022. In addition, in our 2022 results, nearly half (48%) of overall respondents indicated they do not have complete confidence that their company’s financial data is accurate.

The top three reasons given for this mistrust were:

1. Some or all of my team are working from home—making it difficult to know if the right processes are being followed

2. Data from too many sources—making it difficult to know if all data is being accounted for correctly

3. A continued reliance on clunky spreadsheets and other outdated processes that leave finance teams in the dark until month-end

As previously noted, most of the C-suite and F&A professionals we surveyed this year are braced for recession. They are also concerned that rising interest rates will push up the cost of company borrowing and mean that their customers will have less to spend.

As a result of relative mistrust in numbers along with these other external factors, the accuracy of companies’ financial data is expected to come under more scrutiny. And, outside of this survey, there have been other developments, such as the SEC’s new clawback rules, which bring even more importance to certainty in financial numbers.

How Financial Automation Helps Increase Confidence in the Numbers

The various factors discussed in the survey expose a weak link in many F&A departments: manual, error-prone, and outdated processes.

And consider this—nearly two-thirds (62%) of our respondents agreed that the ability to view their companies’ financial data in real time will be a “must-have” for business survival over the next 12 months.

How can F&A departments solve for archaic processes and gain real-time visibility? By employing the intelligent use of automation.

Leveraging a solution like BlackLine to automate end-to-end accounting processes—including the financial close, accounts receivable, and intercompany—helps reduce manual errors and increases the quality of your numbers.

In addition, automating manual, transactional work frees up capacity for F&A teams, so more time can be spent on proactively identifying anomalies in the data and ensuring the integrity of the financial reporting. And it allows for earlier views of the financial reports to proactively tackle issues—this directly addresses the concern of 62% of our respondents!

Of course, technology and automation are only part of the solution—they cannot reduce economic uncertainty. However, employing solutions like BlackLine can help companies become more efficient, reduce errors in financial data, and provide visibility so F&A departments can make faster, smarter, and more informed decisions.

Get your copy of the full report Eye of the Storm: F&A’s Role in Responding to Instability & Volatility to understand:

Who is responsible for steering a business through a recession?
F&A’s role in responding to global instability and volatility
The top challenges and pain points, such as intercompany transactions
The importance of cash flow in turbulent economic period

This blog post was originally published on the BlackLine blog.

Challenges Facing Finance Leaders in the Mid-Market

April 20, 2023 by Revelwood

This is a guest post from Michael Morrison, CEO of Fluence Technologies, a partner of Revelwood.

From financial consolidation to reporting, finance has to sort out some supply chain issues of its own.

Fluence recently conducted an independent survey of mid-market finance leaders on the needs and challenges they face stemming from their financial consolidation, close and reporting processes, as well as their aspirations for these processes looking forward.

Everything from attracting and retaining top talent to playing a more influential role in shaping the future of their businesses.

In certain cases, we learned some new lessons. In others, we heard that the more things change, the more they stay the same.

Here’s my take on the results and implications of the study, but if you want to jump straight to the report, download The Roadmap to Modern, Mid-Market Finance today.

Supply chain issues for the finance and accounting function

There are all kinds of reasons an accounting team might have for being late with the financial close. Maybe some of the numbers just didn’t make sense. Perhaps a substantial amount of data had to be double-checked. The team might simply have run out of hours in the day.

There’s one more reason you could add to the list, though.

Supply chain issues.

It sounds like a joke, but it’s not.

People outside of finance might assume it’s a joke because, lately, it’s been hard to ship and receive almost anything.

Pre-pandemic, most people outside of the logistics sector might have struggled to even define the term supply chain. Now we’ve all come to realize how dependent we are on the myriad processes that get products from A to B.

This has made “supply chain issues” a sort of sarcastic shorthand for “stuff happens” in some circles. In finance, however, supply chain problems have been there for some time.

The difference is that you’re not shipping products but critical data – whether for financial reporting purposes or to drive business decisions. And the supply chain issues come in forms you’ll likely find familiar – and typically manually intensive – including:

collecting data from different sources in different formats
reconciling accounts, consolidating financials and closing your books
providing trusted reporting for management, auditors, regulators and more

Supply chain issues in the financial close — Image courtesy of Fluence Technologies

The missing links in financial reporting today

When the finance supply chain breaks down, companies wind up getting financial data long after they truly need it.

Much like making do without a product you ordered online when it gets delayed, though, companies move on. They make the best decisions they can with older information, or simply gut instinct. Which, of course, is never the best move.

Some areas of your business might complain to the accounting team as though they were demanding answers from customer service. It can be difficult for the accountants to provide a good explanation of where the supply chain cracks are, however. There’s no time to investigate because you have to move on to prepare for the next close.

This is one of the reasons Fluence recently published The Roadmap to Modern, Mid-Market Finance, an in-depth study of financial close, consolidation and reporting challenges – and why mid-market finance leaders need to overcome them.

The results may leave you feeling in great company.

A big number you usually don’t see in the average executive survey

What we found was something almost unheard of in a lot of market research: complete unanimity. Among the finance leaders we surveyed, 100% said they want software that ensures an automated close.

100% of finance execs want software to automate the close process — Image courtesy of Fluence Technologies

True, it’s hard to imagine someone putting up their hand to say, “Let’s keep it all manual!” But the stat is significant, because it speaks to how hard the journey to an automated close has been. In fact, only 20% have actually done it.

It’s difficult to make a significant change of any kind across a business, even mid-market firms. But automating the close involves not only technology. It also means recognizing differences in process and a greater attention to how the data will be reported and acted upon.

This — along with governance, controls and audits — is what makes up the financial reporting supply chain.

Financial close, consolidation and reporting are critical links here, because they are where data capture and controls affect everything else.

More than a dozen years ago, the accounting profession may not have realized how badly automation would be needed. In 2008, for example, the International Federation of Accountants (IFA) released a study of its own.

Financial Reporting Supply Chain: Current Perspectives and Directions had a lot to say about auditing standards and regulation. Software applications, not so much. “Lack of forward-looking information” was one of the areas of concern, though. So was the need to “include business-driven information in financial reports.”

Excel and ERPs: The more things change…

Today, a group like the IFA would probably discover the same challenges we did about legacy software – that the vast majority prefer more flexible, modern tools.

But this doesn’t just include large, complex enterprise resource planning (ERP) systems, but also the one software tool that every finance professional knows (and many love) – Excel spreadsheets.

As popular as they’ve become over time, 66% of finance leaders admitted that standalone Excel spreadsheets hinder informed business decisions.

66% of finance leaders say standalone spreadsheets hinder business decisions — Image courtesy of Fluence Technologies

Of course, that doesn’t mean getting rid of them is all that easy – or that you should. With the right controls, governance and data connectivity, Excel can still be the powerhouse it has been for four decades (watch some of our demo videos to see how).

While “Excel Hell” and the usability, accuracy and flexibility challenges of today’s ERP systems are well recognized, our research highlighted another, arguably more important cost of the status quo – your employees.

After the time they’ve invested in a college degree, CPA accreditation and professional development, how much do you think accountants enjoy spending a week or more every month copying and pasting numbers from spreadsheet to spreadsheet? Or having to put a ticket into IT to add a single field to a financial report?

More to the point, what’s the human capital cost of using legacy systems and spreadsheets in your financial close and reporting processes?

88% of finance execs say modern software is critical to attracting and retaining employees — Image courtesy of Fluence Technologies

From our research, the answer is clearly a lot. A full 88% of finance executives told us modern software and tools are critical to attracting, retaining and rewarding employees.

What’s driving today’s supply chain issues?

Finance leaders know that maintaining the status quo is no longer an option.

In fact, 95% said an increasingly volatile business environment and the speed of technological change calls for something better. Instead of being held back by legacy solutions, they want something lightweight and agile.

95% of finance exes say volatility calls for something better than legacy software — Image courtesy of Fluence Technologies

The pandemic is increasing the sense of urgency here, too. Like many other business functions, finance teams are increasingly working remotely at least part of the time.

70% of finance execs are reevaluating their processes and tech post-COVID — Image courtesy of Fluence Technologies

That’s good from an employee experience standpoint, but poses potential risks around the accuracy and security of financial data. That’s why 70% said they are reevaluating what their consolidation, close and reporting processes should look like in a post-COVID era.

Using research to find common ground — and a common path forward

Our hope is that this research will serve as a way of helping other finance leaders to feel less alone. Wrestling with these challenges is common across the profession.

There are consistencies in the difficulties today’s accounting teams face in consolidation and reporting – with the process, the people and the technologies involved.

There’s also a lot of hope that a shift to more advanced ways of working is under way.

Beyond what I’ve touched on in this article, here’s a rundown of what you can expect to find when you download the full report:

A self-assessment among finance leaders about the state of their close and consolidation processes today
The top 3 challenges they encounter when they turn to technology for help
The functions that are most often poorly handled in today’s consolidation and reporting solutions
The value finance leaders put on agile and lightweight solutions
How actively firms are improving the quality of data for analysis

We have numbers for all of these areas, plus plenty of analysis on what the numbers mean. We also offer some recommendations on how to use this data to move your own financial close, consolidation and reporting forward.

Without giving away too many spoilers, what you’ll find is that the opportunities to improve aren’t limited to large enterprises.

There are more mid-market offerings available than ever. And they offer far more than efficiency gains or faster close times.

Indeed, how you modernize your consolidation and reporting today can lead to a better performing business tomorrow.

This blog post was originally published on the Fluence Technologies blog.

The Future of Finance & Accounting

April 6, 2023 by Revelwood

This is a guest post from our partner BlackLine, explaining 2023 predictions for Finance & Accounting.

Look for organizations to focus on process optimization, talent upskilling, and finance agility as major drivers for business leadership in the coming year, according to BlackLine experts Dominick Fatibene and James Tilk.

Technology Powering Transformation

In the webinar “New Year, New Trends: 2023 Predictions for Finance & Accounting,” they predict how technology advances will power transformations to address the top priorities of business leaders in 2023. They also show that transformation is an area of significant concern among CFOs. The webinar points out that 82% of CFOs report that investments in transformation are accelerating, and 70% of CFOs feel that they would be at a disadvantage without financial transformation.

How are organizations doing that?

Hyper-automation which streamlines and automates key parts of processes with leading-edge technologies. “I think this is an area where we’ll be seeing some of the largest investments for enterprise-wide, organization-wide process improvement,” says Fatibene.
Advanced analytics and reporting which involve increasing speed to insight and reporting visibility “To gain more opportunities to analyze information before making critical decisions,” he says.
Self-service tools that leverage technology to put power back in the hands of users, Fatibene notes.
Master data management is a critical resource, says Fatibene, because “When it comes to transformation, everything we do starts with data: how we organize it, how we prepare it and how we use it. That’s why a lot of financial transformation initiatives are revolving around master data management.”

Major Leadership Challenges For 2023

These include concerns about economic conditions, cost controls and access to capital, talent retention, and other workforce issues.

“Economies are going to continue to fluctuate, so prudent spending is a must,” notes Tilk.

Prudent spending is closely related to another challenge: workforce issues. Retaining top talent is always vital, but a new post-Covid challenge has to do with the uncertainties, for many organizations, around office real estate.

“Many corporate leaders are having to rethink real estate,” Tilk says. “For the last few years we’ve been working remote. Now companies are bringing workers back into the office on a part- or full-time basis and they’re also reevaluating what they’re going to do. Do they shrink their footprint or do they redefine their office spaces?”

Transformation & Technology Priorities

Throughout the webinar, Fatibene and Tilk examine other trends—in transformation and technology—that organizations will focus on in 2023.

According to Fatibene, keys to transformation success will be process optimization, talent upskilling, and finance agility. “Process optimization should focus on improving the ways we interact with people, processes, and data, and how to drive value through improved, organization-wide processes,” he says.

Talent upskilling is essential for all businesses today, and finance agility comes about when finance can free up capacity in order to better partner with business-unit peers.

Other BlackLine Predictions for 2023

These are several other findings by BlackLine as we look ahead to the rest of 2023. In addition to predicting increasing emphasis on hyper-automation, the webinar hosts point to a growing need for cyber security and autonomous technologies.

Cybersecurity will be forefront. “This is more critical than ever because of today’s often-distributed workforces and the high costs of security breaches,” Fatibene notes. “I saw a recent statistic that said the average cost of a data breach is $4 million.”
Autonomous technology—organizations will adopt newer technologies that can help provide personal insights to employees who might otherwise not have the time or ability to discover them through manual research.

Ultimately, the webinar points out that the top-level key to success will, as always, be finding ways to make the most out of that most precious resource—time.

“Time is limited—you can’t make more time,” says Fatibene. Because of this, notes Tilk, it’s important that people constantly examine the work they’re doing and look for ways to do it more efficiently.”

Throughout the next year, it will be vital to find the best technologies that can help workers and organizations do just that, by putting their time to the best possible use.

Watch the on-demand webinar to:

Identify 2023 critical trends impacting finance and accounting
Explain how technology improves accuracy, saves time, and benefits everyone, especially during uncertain times
Identify leading practices for optimizing and automating despite disruption

This blog post was originally published on the BlackLine blog.

Ventana: Continuous Accounting Helps Companies Close Faster

March 23, 2023 by Revelwood

Ventana Research, an authoritative and respected market research and advisory services firm, recently looked at Revelwood’s partner Fluence Technologies and how the company helps organizations automate tasks for faster monthly, quarterly and annual closing.

According to Ventana, by 2025 two-thirds of midsized organizations will have applied continuous accounting principles to close their monthly books within one business week. A key objective of continuous accounting is achieving a fast, clean close.

This is part of a larger digital transformation of accounting departments, which aims to eliminate manual tasks such as consolidations and reconciliations by using software automation.

The firm’s Smart Close Dynamic Insights report shows:

56% of organizations close their month within six business days
40% of organizations complete their quarterly close in six business days
69% of those that automate all most of the close process complete the quarterly close within six days
Only 29% of companies that only use some or no software automation close within that six-day window

Ventana states, “Financial executives who are committed to enabling their finance organization to play a more strategic role in their company should focus on ways to streamline their close process.”

Read the full piece on continuous accounting and Fluence Technologies.

Ventana Research on Intercompany Financial Management

March 16, 2023 by Revelwood

Ventana Research, an authoritative and respected market research and advisory services firm, defines intercompany financial management (IFM) as a “discipline for structuring and handling transactions within a corporation and between its legal entities.” It maximizes staff efficiency and accounting accuracy. It also optimizes tax exposure, minimizes tax leakage and “ensures consistent tax and regulatory compliance.”

According to Ventana, “by 2026, one-half of organizations with 10,000 or more employees will have implemented IFM to achieve tax, risk management and accelerated financial close benefits.” The research firm states, “Typically each instance of an IFM issue is relatively small, but in larger, multinational corporations, the money involved adds up to a meaningful annual cost.”

Large, multinational corporations have very complex systems and processes – often exacerbated by having several different ERP systems. Ventana’s Next Generation ERP Benchmark Research finds:

Two-thirds of organizations with more than 1,000 employees have more than one ERP system
27% of percent of these organizations have more than four ERP systems

IFM provides these companies with a way to capture the “required attributes of intercompany agreements and streamlines intercompany dispute resolution and handles taxes with an integrated tax engine to maximize tax deductability.”

Ventana states, “Being strategic in accounting is all about flawlessly managing the details, especially in areas of hair-curling complexity.”

Revelwood’s partner, BlackLine, provides software for intercompany financial management and other accounting activities.

What’s F&A’s Role in Responding to Instability & Volatility?