Robert Kugel's Analyst Perspectives

The lockdowns of 2020 forced accounting departments to adapt to managing their close-to-report cycle without face-to-face contact, prompting many to adopt digital technologies to facilitate the process. It gave further impetus to the digital transformation of the department, which aims to eliminate unnecessary manual tasks such as consolidations and reconciliations using software automation. And, rather than looking at the close as a set of discrete tasks, Controllers and CFOs increasingly are managing the process as a connected stream of responsibilities from pre-close activities to creating and publishing financial, management and external reports. This approach is consistent with what Ventana Research calls continuous accounting.

A key objective of continuous accounting is achieving a fast (within one business week of the end of the period), clean (error-free) close, yet our research finds limited progress. Our recent Smart Close Dynamic Insights shows that 56% of organizations close their month within six business days and only 40% complete their quarterly close (typically a more involved task) in the same period. The research also confirms that automation speeds the process: 69% of those that automate all or most of their close process complete the quarterly close within six days compared to 29% that use some or no automation.

To address these needs, Fluence Technologies’ cloud-based software-as-a-service (SaaS) offers financial consolidation, close management, account reconciliation, reporting and disclosure management designed expressly for midsize organizations (Ventana Research defines this as having between 100 and 999 employees) and independent operating units of larger corporations. The use of consolidation software becomes necessary as organizations grow and have more complex legal entity structure or as they operate with multiple financial management systems, common when companies make acquisitions. Our research consistently finds that using software for managing the close-to-report cycle, and reconciliation automation specifically, is correlated with the ability to close sooner. And by significantly reducing the number of time-consuming repetitive tasks, finance and accounting staff productivity is enhanced, allowing organizations to grow without requiring additional accounting headcount. Having modern accounting tools may also contribute to attracting and retaining the best people.

Fluence offers practical tools designed for midsize organizations that need to achieve fast time to value, minimize training expense and promote efficiency. The company’s XLCubed offering (which is also used by very large organizations) provides data-connected Excel reporting, providing business users with a familiar reporting and analysis environment for high productivity and business intelligence (BI) tools, while avoiding stand-alone spreadsheet pitfalls such as data issues or the need for programming skills. Disclosure management is a growing necessity for midsize organizations for handling financial filings, regulatory reporting, investor briefing reports, board books and any sort of highly formatted periodic reporting where absolute accuracy is essential, and which must conform to specific requirements. The company’s primary markets are North America and, increasingly, Europe, where many countries’ industry leaders are midsize and often have more complex ownership and financial structures compared to those in North America, which complicate and extend the accounting close.

Fluence has made a strong start in offering a set of close-to-report capabilities designed for midsize organizations. These can be acquired one by one or as a set. As is always the case, further enhancements in the capabilities and functions of the software are required to remain competitive. Fluence will need to make investments in enabling the use of artificial intelligence using machine learning (AI/ML) as this technology will be an important differentiator in coming years, especially in task automation, task supervision and narrative reporting.

Controllers and CFOs in organizations that take more than a week to close their books should take steps to accelerate the process to have more time for analysis of results while delivering financial and managerial accounting reports sooner. Reducing manual tasks can achieve this objective while improving the overall efficiency of the department. Investing in software that manages the elements of the close-to-report process not only enhances efficiency today, but it also enables midsize companies to scale more profitably by reducing the need to add staff as business volumes increase. By eliminating tedious manual tasks, technology can play an important role in accelerating the process.

I assert that by 2025, two-thirds of organizations will have applied continuous accounting principles —including the use of close automation — to close their monthly books within one business week, up from one-half today. I recommend that financial executives, especially Controllers, 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, especially those where the close takes more than one business week. Specifically, they should consider how technology can help them achieve better results that can improve the performance of their entire organization.

Regards,

Robert Kugel