Minutes on

Modern Finance
The Modern Close

Does Your Finance Organization

Measure Up?

Moving From a Classic to

a Modern Close

Improve Your Close Processes

to Improve the Business
Modern CFO Best Practices

Closing the books, reporting more efficiently

those are just table stakes for a modern CFO.
You cant ask for a more strategic role in the
organization if you cant deliver on the basics.

According to a new global survey commissioned

by Oracle and Accenture, the expectations
on finance to deliver insights to the business
are increasing, especially among high-growth
companies which typically use data-driven
information to boost customer loyalty and
market share.2 Smart finance executives are
focused on reducing the close process to meet

Jeff Henley, Chairman of the Board and former CFO,

Oracle Corporation
Although the close process may not rank at
the top of C-suite priorities, smart finance
executives know that a well-designed,
technology-enabled close has become a critical
best practice by which modern CFOs and their
teams are measured. The faster you can close
the books and deliver right-time insights to key
decision makers, the more strategic your finance
organization can be to the business.
According to Les Stone, Managing Director Finance & Enterprise Performance, Accenture,
a world-class close can be defined as a
three-day close for legal entities and then
an additional two days for consolidation and
reporting, for a total of 5 days. Yet today, only
38% of companies appear to close their books
in 5-6 days, down from 47% in 2007.1 While
some would like to attribute slower closes to
growing business complexity and increased
regulatory burdens, Stone and other industry
experts believe that the more likely culprits are
poorly-designed, manual finance processes and
inconsistent data sourced from multiple systems.
To become world-class, finance organizations
need to evolve from a traditional close process
in which the steps are sequential, to a modern,
more strategic close that allows CFOs and
1

their finance teams to perform key functions in

parallel during the close process. A company
with a more nimble close process, for example,
can take care of a significant number of account
reconciliations outside the critical path of the
close, rather than right in the middle of it, which
is a traditional and problematicway to
handle reconciliations. If you can achieve such
efficiencies and modernize your close process,
you can redeploy resources to planning and
analytics, providing much greater value to the
business.

In what I would call the classic close,

nothing significant happens until the end
of the month. I think where the move has
been over the last few years has been
towards a more modern close, where you
cut off your sub ledgers and transactional
systems early, then look at material
transactions that may have happened
between the date of that early close and
the true month end. When you close this
way, you can then redeploy finance staff
to work on the financial planning and
analysis component of the close.

Streamline Your
Processes to Achieve
Ruthless Standardization

these new demands; according to the American

Productivity & Quality Center, reducing the close
process by two days increases the resources
available for other high priority projects by
24 days a year.3 The following best practices
can help you close the books faster and more
accurately:

Choose Technology
that Supports Your
Processes

Overarching these three leading practices is a

fourth critical component: governance and data
management. At the end of the day it all comes
down to processes and governance, says
Stone. Standardized processes are inextricable
from strong governance and managing data to
ensure quality.

Adopt an Integrated
Business Services
Model

Governance & Data Management

Process
Technology
Shared Service Model

Les Stone, Managing Director - Finance &

Enterprise Performance, Accenture

Trends in Developing the Fast, Clean Close, Ventana Research, 2012.

Empowering Modern Finance: the CFO as Technology Evangelist, Oracle and Accenture, March 2014.
Kaigh, Elizabeth, Six Excuses Companies use to Avoid Fixing the Financial close Process, February 5,
2014 (cited in http://www.apqc.org/blog/six-excuses-companies-use-avoid-fixing-financial-close-process)

2
3

1
Streamline Processes
to Achieve Ruthless
Standardization

I like to think about a world-class

close as similar to Olympic gold
medal execution: a process that
you execute with athletic precision,
and that is flawless.
Les Stone, Managing Director - Finance
& Enterprise Performance, Accenture

With regard to the close process, it is critical

to take a hard look at processes with an eye
toward achieving ruthless standardization.
The key is to establish processes that are
repeatable, predictable, and scalable, and then
ensure that those processes are overseen with
a governance layer, without which things will
very quickly unwind. Follow these steps to help
ensure a well-governed close:
Designate a global process owner
who makes the decisions about
whether and when process changes
must occur for account reconciliation,
allocations, chart of accounts,
materiality thresholds, etc.
Ensure that the tone from the top
reinforces the processes you have
established. The corporate CFO and
rest of the C-suite must support and
make it clear that the processes are
to be followed, no exceptions.
Appoint a close czar who is the
owner of the close, establishing
a schedule and making sure it is
communicated and enforced.

The goal is to streamline your close through

standardization. You should set limits to cap the
volume of manual journal entries that can be
made late in the close, for example. You can
do this by defining what types of entries can
be made on certain days in the close process,
both in terms of materiality and reporting impact.
For example, you might allow any type of entry
to be made on day one. But by day three, you
can only make an entry of $50,000 or more
that impacts more than one financial statement
reporting line. The definitions will vary based on
your companys controls and financial structure,
but having rigorous standards is the only way to
keep up with the pace of business. When setting
materiality thresholds, be sure to synchronize
the timing with the budgeting and forecasting
process.
Allocations can be another bottleneck in the
close process that you can minimize through
process improvement. Allocations are primarily
done to support statutory (tax transfer pricing)
purposes. If allocations are made beyond this,
they should be done in a manner so people can
be held accountable. This is typically done by
segmenting responsibility statements between
non-controllable versus controllable allocations
or by moving to a COP concept (contribution to
overhead and profit).

Intercompany accounting is another area

that can cause a bottleneck during the close,
primarily because of out of balance situations
between two legal entities. The book now
dispute later process will help minimize
these out of balance situations. This will then
be governed by a robust dispute resolution
process that allows for dispute escalation
from accounting managers up through to the
corporate CFO if business units cannot agree on
the intercompany charges. A meeting with the
corporate CFO to resolve intercompany disputes
is probably a meeting that most will try to avoid.
You must look at every component of the close
process - aggregating transactions, foreign
currency, manual interfaces, intercompany
accounting, allocations, journal entries, account
reconciliations, and more - and establish
repeatable, predictable, and scalable processes
for them all.

Scaling back the chart of accounts makes

a tremendous difference as well. Stone helped
one company reduce its chart of accounts
by about 80% so they could speed up the
close process without killing their people.
Clear definitions of each chart segment were
developed and communicated, thus reducing
manual journal entries since there were fewer
mispostings. It also helped reduce the excessive
number of account reconciliations that were
being performed - a great example of how
process improvements go hand in hand with
data management and governance. Companies
often hesitate to thin out their chart of accounts,
but its critical to achieving data harmonization
across the enterprise and simplifying
transaction entry.

2
Choose Technology That Supports
Your Streamlined Processes

There are a host of technology tools that

facilitate a faster close. First and foremost, a
global accounting integration and reporting
platform allows you to standardize the
accounting from multiple third-party transactional
systems. The ability to bring together financial
information from a variety of systems without
disrupting those existing offers great benefit
to companies with a complex IT environment
that have grown through acquisitions, such as
Oracle. The ability to adopt such a platform over
time without disrupting current processes is also
key. Oracle, for example, deployed its Fusion
Accounting Hub product as a first step toward
moving to a full instance of Fusion Financials,
and in the process streamlined the close process
by one day.

Integrating Acquisitions at Oracle

with Fusion Accounting Hub
Legally combining companies is a very
complicated process, especially for
acquisitions governed by unique laws
and regulations. The acquirer must roll in
the acquired companys legacy systems
including vital operations such as
accounts receivable and general ledger without disrupting day-to-day operations.
These were just some of the accounting
challenges facing Oracle, which had
acquired over 100 companies since 2005
as part of its strategy to become the #1
software provider worldwide. Oracles
finance team decided to standardize on
Fusion Accounting Hub (FAH) to design
a global chart of accounts to manage its
business more uniformly, and to lay the
foundation for moving to a full Fusion
Financials instance. In conjunction,
Oracles finance team is using Oracle
Hyperion Data Relationship Management
(DRM) to centralize and automate
governance of its global chart of accounts
and related hierarchies, which will help the
company lower costs and greatly reduce
risk.

You can also use tools that are easy to use

and/or already familiar to everyone involved to
speed up the close process. For example, the
close owner could establish a schedule for close
tasks by setting up deadlines in the corporate
calendaring app. A certain journal entry must
be made by a specific date and timepossibly
with a 30 minute grace period. If that entry isnt
booked by the date and time required, that
triggers an alert up the chain of command.

FAH has simplified the process of

consolidating general ledger data.
Oracles finance teams can submit primary
ledgers running in E-Business Suite (EBS)
R12 directly to FAH, eliminating the need
for more than 90 redundant consolidation
ledgers. With FAH, it is also possible to
submit incrementally, so if an adjustment
needs to be booked in a primary ledger
after close, it can be done without
reopening it and resubmitting. This affords
earlier visibility to period-end actuals
during the close, providing management
with valuable performance information for
decision-making purposes.

Similarly, collaboration tools to enhance

communication and accountability can help
facilitate a faster close and support other
finance activities. At Oracle, the finance team

is phasing out email altogether as a means

of communicating around a variety of critical
functions such as the close process and finance
transformation initiatives. Instead, they use a
next-generation internal collaboration hub, the
Oracle Social Network (OSN). Social networks
such as OSN that are tied to the transactions
themselves can be exponentially productive
since finance personnel can immediately
see the status of exceptions within context.
Responsibility is clearly assigned and schedules
can be closely adhered to, and learnings and
best practices can be continuously monitored
and refined.

3
Adopt an Integrated Business
Services Model

Modern CFOs can dial up the effectiveness of

the finance function, which includes improving
the close process, by leveraging shared services
centers and centers of excellence. Start by
asking, What needs to be very close to the
business and what can be handled by a shared
services center? Accenture sees leading
companies moving towards the integrated
business services (IBS) model, which expands
on the traditional shared services foundation
of solid service management and focuses on
multiple functions with process standardization
throughout the organization. With the IBS
model, it is not uncommon to find 60-65% of
transactional activities in a shared services
environment.
4

An added benefit to shared services can

be lowered costs through reduced resource
requirements, but the true endgame is to
increase efficiency and become a better business
partner. To accomplish this, leading companies
are moving from shared services to an IBS
model. The operational decisions made by IBS
organization are no longer focused solely on
cost management but are now balanced with the
responsibilityshared jointly with the business
for managing risk and driving growth.4 The
goal is to provide the analytics, infrastructure,
discipline, and expertise necessary to cope with
market volatility and associated risks. With that
foundation, modern CFOs can make an impact
far greater than streamlining the financial close
process.

Any mechanism that reinforces ruthless

standardization without introducing unnecessary
complexity and risk can help finance teams play
a more strategic role in shaping the business that
goes beyond the necessary but less glamorous

financial close. Following the best practices

outlined here will help you modernize and speed
up your organizations financial close and help
stay nimble in the face of volatile markets and
ever-more-complex regulatory demands.

CFOs Benefit from Shared Services Shakeup, David Axson, CFO.com, March 13, 2013.

Oracleiscommittedtodevelopingpracticesandproductsthathelpprotecttheenvironment

Modern Finance Best

Practice Guide Series
April 2014
Author: Anne Ozzimo
Oracle Corporation
World Headquarters
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Redwood Shores, CA 94065
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Worldwide Inquiries:
Phone: +1.650.506.7000
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Copyright 2014, Oracle and/or its affiliates. All rights reserved.

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US$28.6 billion for the fiscal year ended August 31, 2013. Its home page is www.accenture.com.
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