The Blueprint for Continuous Accounting

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THE BLUEPRINT FOR CONTINUOUS ACCOUNTING

Trust is in the Balanceâ„¢


It’s Time to Build Your Future In today’s highly complex global business environment, companies are constantly expected to do more with less, to run leaner while becoming more effective than ever. This is especially true for Accounting and Finance. They are now required to not only deliver periodic financial data and reports, but also real-time analysis and intelligence.

To meet mounting demands, Finance is shifting from traditional, rigid, and manual accounting processes to more automated, flexible, and agile operations. This shift is essential because it provides the productivity benefits that free organizations to deepen their focus on analyzing and reporting financial performance. Yet nearly 70% of respondents in a recent survey by The Hackett Group report that manual processes are still the biggest bottleneck in financial close and accounting operations, with most of these processes completed with extreme resource requirements at the end of every accounting period. It’s no surprise that more than half of Finance executives report being frustrated by spending too much time on nonstrategic work. They are awash in transactional activity and two-thirds say they don’t have time for process improvement.1 Failing to transform core accounting business processes leaves companies at a competitive disadvantage. In order to make the shift from overworked cost center to strategic partner for their business, accounting and finance teams must step out from behind the spreadsheets and embrace the future. Technology is changing the way business is done all around us, and it’s time for Accounting and Finance to realize the evolutionary benefits of modernity. However, technology is only part of the solution. True organizational transformation requires adopting a fundamental shift in philosophy, one that combines technology with a focus on reimagining legacy processes, empowering the best employees, and embracing a culture of continuous improvement.

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FSN – The Future of the Finance Function – 2016 Survey


Falling Short

There’s a significant obstacle facing accounting and finance teams: traditional financial close processes were not built for the modern business economy. Manual processes are tedious and error-prone, resulting in gratuitous resource demands and long hours that put incredible strain on employees during the financial close every month. The conventional record-to-report (R2R) model condenses a huge amount of work into a short span of time and delays data processing and reporting until the end of the period. This is a reactive approach, and the costs of operating this way are high. It leaves no time for analysis, and the increased risk of error can damage the quality, accuracy, and timeliness of results. Leaving so much work to get done in just a week or so places incredible amounts of strain on accounting and finance teams, often only to deliver out-of-date or inaccurate results. It’s not that the process is broken. It’s simply failed to modernize. The always-on nature of business today involves globally dispersed transactions that come in around the clock, vastly increasing the number of unreconciled transactions. Reactive accounting processes in the form of traditional record-to-report risk hindering business operations and damaging the integrity of financial reports.

There’s a better way.

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The Modern Approach That’s where a new approach called Continuous Accounting comes in. It can be thought of as real-time record-to-report, a blueprint for a more modern accounting organization, and a call to evolve beyond batch processing.

Continuous Accounting embeds automation, control, and period-end tasks within day-to-day activities, allowing the rigid accounting calendar to more closely mirror the broader business. Continuous Accounting transforms the way business process works by emphasizing real-time processing, especially skilled employees, and deep analysis. The result is a more efficient close, more accurate financials, and a more effective organization. Continuous Accounting more evenly distributes the workload associated with the period-end close, while enabling constant reporting, verification, and analysis. The ability to perform tasks in smaller chunks on a more frequent basis evens out workloads. Being able to evaluate the integrity of information at any point in time enables continual monitoring for errors, fraud, and inefficiencies. Anytime-access to the data allows teams to look at the impact of changes such as currency fluctuations with up-to-date financial intelligence. This concept represents a fundamental shift in the way that accounting and finance are done. When automatic processing eliminates rote tasks, accuracy is inherent. Continuous Accounting empowers the Office of Finance with real-time intelligence, enabling skilled accountants to spend more time on strategic research and analysis, and become proactive business leaders instead of reactive operators.


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Continuous Accounting in Action This is not simply a technology story.

Continuous Accounting is not just another way to do account reconciliations, nor an impractical pipe dream attainable only by the largest companies or the smallest, most agile teams. This modern, philosophical shift is an ongoing, stepwise journey with achievable milestones. It is a story about timing, process design, and unleashing the power of exceptional accountants. Continuous Accounting is a blueprint for the modern, strategic accounting organization. Effectively implementing Continuous Accounting requires a holistic approach, combining a mix of technology, process, and people to realize continued improvements across the accounting organization. Using technology to automate procedures enhances the benefits of process optimization, while increasing the overall productivity of accounting team members. Optimized processes will streamline automation, reduce risk, improve accuracy, and increase efficiency, benefiting the entire accounting and finance function. Reducing manual and rote workloads frees team members to be more productive and use their exceptional abilities to conduct strategic research and analysis. Finally, the entire F&A organization uses these gains to provide increased strategic value to the broader business.


RECONCILIATION

VARIANCE ANALYSIS

CONSOLIDATED RECONCILIATION

SOFT CLOSE CLOSE LEDGERS

WEB SERVICES CONNECTORS SFTP

ETL TOOLS

INTEGRATION LAYER

SMART AGENTS

ACCOUNT DETAIL ANALYSIS

JOB SCHEDULING RULES & BUSINESS LOGIC

ANALYSIS & REPORTS

MANAGEMENT REPORTING

INTERCOMPANY SETTLEMENT VARIANCE EXPLANATION

TEMPLATES

WORKFLOW

CASH MATCHING

EXCEPTION RESEARCH

HARD CLOSE IF NECESSARY

DISCLOSURE MANAGEMENT XBRL TAGGING

ANALYSIS

JOURNAL ENTRY

INTERCOMPANY PROCESSING TRANSACTION ANALYSIS

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Technology Using technology to automate procedures enhances the benefits of process optimization while increasing the overall productivity of accounting team members.

Bill Gates once said, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” Though truer words may never have been spoken, this is often interpreted as process-first guidance on transforming business process. However, following that logic often leads to clever workarounds that masquerade as “automation” within existing systems, including spreadsheets. Instead, by investigating the technology landscape while reviewing process, if not before, organizational leaders can open their eyes to previously unimagined possibilities. For example, Caesars Entertainment Corporation aggressively blends technology into everything they do. They’re constantly looking for ways to automate, streamline, or optimize processes. Caesars has built a strong relationship with their internal IT group, so instead of any sort of rivalry, business users feel comfortable pulling in IT resources when they need

“Some people suggest that you should fix a process before you introduce new technology. In our case, technology drove us to fix and standardize our process.” EAMONN MATTHEWS, BUSINESS PROCESS LEAD, ACCOUNTING & REPORTING

help. That cultivated trust grants the accounting team broad leeway to adopt business-owned technology projects, which allows them to be agile to their division’s unique needs and continuously look for new ways to optimize and automate process with technology. End-to-end process automation is critical for keeping pace with change and elevating the strategic role of finance. The results of upgrading business performance through automation are substantial. According to PwC, best-in-class finance organizations run at a 40% lower cost than their peers, yet spend 20% more time on analysis versus data gathering. Companies are also seeing faster financial close cycles, doubled accounting efficiency, and a more satisfied and engaged accounting and finance organization.2

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How to Create a World-Class Finance Function - CFO.com


Process Optimized processes will streamline automation, reduce risk, improve accuracy, and increase efficiency, benefiting the entire accounting and finance function.

Left unchecked, manual processes together with expanding data volumes are preventing Finance from making the shift from back-office accountant to strategic business partner. Rote, human-driven, and error-prone manual procedures expose companies to the undue risk of inaccuracy, or worse, restatement. The essential first step to process improvement is to identify the bottlenecks, which typically stem from highly manual procedures. This is where you’ll find the greatest opportunities to improve and streamline existing processes. Cox Communications is a prime example of success. Where Cox stands out is in their process organization. They started with a couple of assumptions: R2R is good but “the Close” is bad. As a result, they’ve taken all of the tasks typically associated with the R2R process, broken them down into their component parts, and then assigned them out at a granular level.

“At Caesars we’re always looking at our processes to see how they can be improved. And we’re evaluating new technologies to see how they can help get us there.” ALLISON COMBS, CONTROLLER

Cox sees Continuous Accounting as a two-step process. First, automate everything that’s rote or manual, including every journal entry, ERP job, reconciliation, or function that has any logic whatsoever. Once that’s complete, they focus their accountants’ time, effort, and energy on analysis and activities such as issue identification and resolution, contracts and revenue, and business operations. These changes didn’t take place over night. Taking a gradual approach to modern process improvement allows an organization to realize incremental results and benefits with every step and at every level.

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People Reducing manual and rote workloads frees team members to be more productive and use their exceptional abilities to help guide the business.

Share of time finance staff spends on analysis

25% 2016

75% 2020

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There appears to be widespread agreement that accounting and finance teams have the necessary skillsets to drive business strategy, but these skills are underutilized. To unlock this value, companies need to automate the tedious and manual accounting work that consumes so much of accountants’ time and effort. Cox hires people who they believe will fit into their culture. Individuals are chosen for promotion based on their intelligence, work ethic, and decision-making ability. Accountants are chosen for their flexibility and comfort taking initiative. If overall responsibilities, processes, and tools on hand change frequently, accountants must be comfortable with change, so flexibility is sought out when hiring new team members. They prefer to promote internally for management positions as few senior accountants outside of Cox would understand their processes, structure, tools, and responsibilities. Along similar lines, the Caesars team is made up entirely of accountants who have a deep interest in technology. The group began with a financial controller and one accountant who had minor technology backgrounds. They began optimizing, almost as a hobby, and their success was noticed by senior management. The team now works in very fluid fashion. Workloads are unstructured and often shared. Accountants, analysts, developers, and managers are cross-trained on other functions, which allows work to be balanced across all employees. When manual processes are automated, accounting and finance teams spend fewer hours on transactional activities. The focus shifts to analyzing the data and reports, and addressing only the exceptions. Thus, by embedding Continuous Accounting practices, everyday accountants can become exceptional accountants, providing high-value, strategic services in areas like fraud detection, compliance, data analytics, technology, and business advice.

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Death by Digital: Good-Bye to Finance as You Know It, CFO.com


Organization Accurate, always available, and real-time financial intelligence enables agile, strategic business decisions and a more effective organization.

Modern business requires every part of the organization to be forward-looking and strategic. Adopting technology, improving process, and empowering people should have clear, tangible benefits for any organization. Understanding the benefits of transformation projects requires measurement. Evaluating KPIs for timeliness, accuracy, efficiency, and employee satisfaction enables organizations to establish baselines and review results to facilitate continuous improvements over time. Additionally, these metrics give finance leaders visibility into how their department is performing, so they can efficiently manage their operations

“We now have the time to spend working on the really crucial parts of accounting: analyzing results and understanding the business cause and effect of account balance changes. As result, we’re providing more strategic, long-term value to the company.” TAMMIE COLEY, EXECUTIVE DIRECTOR OF FINANCE OPERATIONS

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and enable data-driven decision making. More data might seem alarming at first. As sources of information continue to expand across every business division, the volume of data in Accounting and Finance is increasing as well. According to a recent survey by FSN, 81% of senior finance executives believe the CFO will be responsible for corporate data in the future, and two-thirds of CFOs believe that an inability to master the variety and volume of new business data is a serious threat to the future finance function.4 However, by applying the principles of Continuous Accounting, automating accounting processes with technology, and improving legacy processes, strategic accountants are unleashed to analyze data. This in turn gives senior finance leaders timely, accurate, and consumable information. In other words, Continuous Accounting delivers real-time intelligence and unlocks competitive advantages for finance and the entire organization they serve.

FSN – The Future of the Finance Function – 2016 Survey

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The Continuous Accounting Maturity Model Many organizations fear finance transformation projects. Horror stories of failed attempts and the confusion of figuring out exactly where to start leave many quitting before they even begin. Indeed, just getting started might be the hardest part. Continuous Accounting is not an all or nothing proposition. It’s a step-wise journey. The best performing finance teams embrace this journey and embark on it by building a culture of continuous improvement focused on enhancing technology, process, and people that benefit the entire organization. They know that success means setting goals and always adapting, innovating, and improving in order to meet them. Evaluate this maturity model in the context of your organization’s specific needs and goals, and start building your future.

Modernized Record-to-Report A strong leader with the vision and mandate for change evaluates and

Legacy Processes Manual, time-consuming, and inefficient processes are “the way it’s always been done.” Armed with only ERPs and spreadsheets, talented accountants spend most of their time on rote tasks.

implements individual tools to begin automating and streamlining the existing record-to-report process.


Continuous Improvement Looking for new ways to use technology to parse and automate logic-based

Strategic Accounting Real-time visibility into granular information frees accountants to

processes, hiring exceptional accountants, and developing a culture of continuous improvement. Every day.

instantly research and fix issues.

Continuous Processing Best-in-breed software automation

No longer a Close-focused cost center, Accounting is a strategic partner to the business.

supports increased volume and complexity. This creates decisionmaking autonomy for senior accountants, and delivers a fast, effective Close for the Controller.

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LEVEL 1

LEVEL 2

While technology has revolutionized the modern

The Continuous Accounting model utilizes individualized

business world, the record-to-report process

tools and integration to automate the record-to-report

has remained unchanged since the days of

process. The key to success is a combination of

Lotus Notes and 18in paper. ERP systems and

technology, process, and people. An investment in

spreadsheets are still the only traditional tools

purpose-built technology to automate and streamline

available to today’s accounting and finance

existing processes must be led by a strong leader

professionals, and while this is accepted by

with a vision and mandate for change. There is often

many as “the way it’s always been done,”

internal resistance to change, stemming from a distrust

it results in a time-consuming, inefficient process

of technology or simply not wanting to depart from the

that is fraught with risk. Talented accountants are

familiarity of current processes. An empowered change

spending most of their time performing rote tasks

agent can create an understanding of technology

that take them away from value-adding activities,

as a tool that not only delivers speed and accuracy,

like the enhanced analysis and strategy that drew

but completely transforms the way accounting and

them to this profession in the first place.

finance works as well.

Legacy Processes

Modernized R2R


2,000,000+

LEVEL 3

Continuous Processing Cutting edge, best-in-breed software provides extensive automation and support for complexity and volume. With this in place, the financial close is effectively managed, issues are identified as they occur, and analysis can be performed throughout the month. All of the concerns that Controllers previously had about overtime, incomplete work, errors, and not completing the close on time are eliminated. Front-line managers and senior accountants have broad autonomy to balance workloads and make decisions. The road to this point of the process is paved with questioning

Transactions automatically imported via matching every month

“We auto-certify 95-98% of our 134,000 reconciliations, and import more than 2 million transactions every month via matching. Being able to utilize technology to make the accounting and finance process more manageable and more efficient means we have time to perform more analysis and manage risk.� SHAKORA DERIXSON, VICE PRESIDENT OF FINANCE AND ACCOUNTING OPERATIONS

conventional wisdom, challenging organizational inertia, and rebuilding the R2R process with an emphasis on real-time processing.

The Blueprint for Continuous Accounting

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LEVEL 4

LEVEL 5

People are at the heart of innovation at every company,

All of this leads to an organization that is truly data-

and there is undeniable value in developing exceptional

driven. Work is broken down into smaller and smaller

accountants. This means empowering your people to

segments, more automation is brought into play, and

make decisions, expand their strategic and analytical

reconciled and validated actuals are produced with

abilities, and maximize their skillsets. When staff

virtually no added work. Accounting and Finance are

accountants are granted broad autonomy to regulate

constantly looking for new ways to use technology,

their own workload and to identify, remediate, and

while real-time data and metrics are utilized to benchmark

resolve issues, they will work collaboratively with limited

success, coach professionals, and continually identify

oversight. With the right tools in place, the financial close

little ways to improve. These small changes add up and

becomes a non-event, rendered trivial by a combination

lead to a daily increase in efficiency and effectiveness,

of technology and process redesign. The Accounting

encouraging a company-wide culture of continuous

organization shifts its focus to driving value for the

improvement. Continuous Accounting puts you ahead

business, proactively identifying issues, and partnering

of the curve, and continuous improvement is your

with other teams.

investment into staying there.

Strategic Accounting

Continuous Improvement


Building Your Future By embedding process standardization, technical automation, and constant analysis, the Office of Finance and its team members advance beyond transactional accounting execution to become strategic partners to their business. Continuous Accounting is not the destination, but a journey yielding continuous improvement in the quality, accuracy, and efficiency of accounting operations. But, the first step is always the hardest. Here are six steps to get you started:

STEP 1

STEP 4

Analyze Your Current State

Monitor Metrics & Results

What are your greatest challenges? Consider visibility

Leverage continuous activity to constantly review output,

and efficiency gaps, determine risk exposure and ask

and investigate alerts from flux analysis, exceptions,

your staff accountants for help with identifying the most

and anomalies. Make adjustments as needed in real time.

painful, inefficient, and risky accounting processes.

STEP 5 STEP 2

Design Your Future State

Review Outcomes & Controls On a quarterly or annual basis, review the

Imagine the ideal state by playing the “What If” game to

outcomes of your Continuous Accounting journey.

design your plan for the future. Start with the low-hanging

Discover macro trends and identify process and

fruit and areas with excess risk exposure. Then, identify

control gaps. Compare successes vs. original

critical areas for regular review and proactive investigation.

objectives – what worked, and what didn’t?

STEP 3

STEP 6

Automate & Optimize Process

Improve Continuously

Split batch processes into smaller components, then

Combining the knowledge gleaned from the

schedule those components more often and embed them

Review stage, rinse and repeat. Return to Step 1

within daily activities. When your processes are improved

and focus on a more challenging tier of improvements,

and standardized, automate wherever possible.

targeting the risky and critical gaps.

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Transform from the Bottom, Up The most successful process evolution projects start at the bottom and work their way up. By breaking down any process into its smallest components, opportunities for continued automation and optimization surface organically.

Let’s take the process of reconciling a bank account as an example. Organizations in the early stages of the Continuous Accounting Maturity Model likely manually tick-and-tie transactions to complete reconciliations on spreadsheets, print them out, and store them in a binder somewhere. An obvious first step to improvement here would be to adopt software for account reconciliations. This helps streamline and control the process, but transactions are still manually matched and reconciled, and correcting journal entries are created separately in the ERP, then attached to support the reconciled balance.

MERCHANT BANK CREDIT CARD PROCESSOR

BANK

INTEGRATION LAYER

POS

BLACKLINE MATCHING


The next step to improving this business process is to automate the processing of the detailed data behind the account balance. Thousands of transactions make up high volume bank accounts, requiring manual ticking-andtying, a frightful process full of rainbow spreadsheets, macros, and confusion. Automating transaction matching not only removes much of the pain associated with reconciling high volume accounts, but also makes exception handling and categorizing transactions as reconciling items easier. Once an organization begins modernizing their R2R process by centralizing account reconciliations and automating transaction processing, automating logic-based, complex journals creates a comprehensive endto-end process. By leveraging journals management software, companies can unify journal entry creation and posting across disparate ERPs and systems, and ensure correcting entries are always tied to the associated reconciliation. This embeds consistency and control into the creation of journals, while ensuring instant visibility into all reconciling items. With transaction matching, automated journals, and account reconciliations, even historically resource-intensive processes like reconciling high volume bank accounts can be run automatically and continuously, leaving only exception handling to the capable, nuanced intelligence of exceptional accountants. Once this process – one of many – is automated and optimized, imagine extrapolating these results across all reconciliations, journal entries, and matching opportunities. This bottoms up approach allows organizations to methodically and continuously improve over time. As new technology is adopted, processes are improved, and people are empowered, the entire business realizes unprecedented agility that enables intelligent analysis and data-driven decision-making.

AUTO-CERTIFY RECONCILIATIONS POST ADJUSTING JOURNAL ENTRIES

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The Future of Finance is Bright Continuous Accounting is an exciting and novel approach delivering incredible benefits for Accounting and Finance. Instead of reactive operations, organizations and teams work proactively.

Instead of gross workload imbalances, work is distributed throughout the period, freeing time for in-depth analysis and more value-adding projects. With unique visibility into the current state of a company’s finances, company leadership, and thus the entire business, realizes unprecedented agility.


A world where the CFO can walk into any meeting and provide real-time – not only up-to-date, but up-to-the-minute – financial intelligence is achievable. Modernizing legacy record-to-report processes is not an option. Any company that avoids transforming its finance function is putting itself at risk. Beyond the risks associated with out-of-date accounting and finance practices, 
the increasingly complex nature of global business cycles means that companies that are slow to modernize their accounting operations are at a competitive disadvantage. The best performing finance teams know that success means always adapting, innovating, and improving. This shouldn’t be discouraging. It’s inspiring. Every day can be better than the last.

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ABOUT BLACKLINE BlackLine’s mission is to continuously improve the quality, accuracy, and efficiency of Accounting and Finance by centralizing key accounting functions within a single, unified cloud platform. BlackLine enables customers to move beyond outdated processes and point solutions to a Continuous Accounting model, which embeds real-time automation, controls, and period-end tasks within day-to-day accounting activities. As a result, BlackLine helps companies achieve Modern Finance and ensure an efficient and more accurate financial close. More than 1,500 companies around the world trust BlackLine to ensure balance sheet integrity and confidence in their financial statements.

LEARN MORE & DOWNLOAD THE BLUEPRINT FOR CONTINUOUS ACCOUNTING BLACKLINE.COM/BLUEPRINT

Trust is in the Balance™


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