By Jordaan Burger, Vice President of Finance for Sage Africa & Middle East

Closing the books after month-end places huge pressure on financial teams, but it can be an even greater challenge for SMBs – from both a time and resource perspective. But in a world in which moving quickly is critical to business growth, the ability to accurately report financials and forecasts becomes even more important, and any delay in accessing accurate balance sheets can threaten business survival.

With companies globally facing market volatility – from inflation, supply chain issues or high competition for skilled employees – getting trusted numbers becomes even more important for businesses to better strategize and build resilience for market unpredictability. 

Findings from Sage’s Close the Books 2023 Global Survey revealed that it takes six working days for SMBs across the globe to close the books on average, yet those with automated processes tend to close two days faster. Clearly, there is an opportunity to accelerate the close process through automation, and tech-enabled businesses have a now-proven edge in supporting the finance team’s efficiency and understanding the knock-on impact on the entire business.

A tech-tonic shift

There’s been a significant shift in how finance departments operate in recent years. According to McKinsey, 40% of financial activities can be fully automated, and another 17% can be mostly automated. This alone suggests that finance teams are beginning to realise the impact of automation on their day-to-day finance activities, freeing them up to perform a more strategic role within the business.

A similar picture is emerging in the closing the books process. The report from Sage found that journal entries, bank reconciliations, and reviewing transactions for accuracy and anomalies were the top three pain points companies face during the close process, with 50% citing a lack of automation for these challenges. The key insight here is that finance teams recognise and are eager to automate processes where they can but struggle to understand where to start or simply do not have the tech or know-how to do so.

Closing the books on automation

The challenge with many of the processes in the close period is that many activities happen outside the accounting systems. Companies might need to consolidate separate business entities, calculate fixed asset depreciation, or allocate overhead in spreadsheets. Whenever a process is happening outside of the accounting solution and must be entered back in, it’s not just inefficient, but the risk of error increases and traceability decreases.

Companies may also need to export data to spreadsheets to create reports that require breaking information out by channel, account, or department. They may also need to incorporate non-financial data. All this requires a broad set of skills and functionalities that may not be bound to one specific team, tool, or system. Then, once all the data is where it needs to be, it falls on the accountancy team to reconcile to ensure it’s accurate, with no duplicates, and that every data point is matched to the right account and/or department.

However, automation can solve many of these challenges. It’s about breaking it down into areas of consideration and then making decisions about where and what can be automated. Firstly, how is the data collected and inputted into the accounting system? Are existing systems integrated appropriately so that you don’t have to keep rekeying information? Is the solution’s functionality being used to automate within the solution instead of exporting, calculating and re-entering information? And finally, how is the data being reported and analysed?

Of course, access to the cloud and its open integration abilities are underlying all this. As the industry adopts more AI technology, such as outlier detection systems, they’re almost impossible to deploy without the cloud because you need access to the largest data sets to inform and train AI and machine learning solutions accordingly.

The value-added opportunity gaps

Sage’s report found that companies with the most automation have 3x the time for value-added activity, and those that have adopted a cloud solution are 25% more automated on average. If we think about motivations for accountants entering the industry, management of manual operations probably doesn’t spring to mind.

Today’s aspiring young accountants are likely to be more interested in partnering with the business, guiding them to make the right decisions, and having the confidence and tools to do so. Automation can strip away manual activities from accountants, giving them valuable time to focus on being strategic financial leaders. It will impact how they do their job and provide businesses with better visibility to make informed decisions driven by data insights.

Key takeaways for accountants to consider during the close process:

·         Automate where you can and consider the cloud – free up valuable time to focus on driving business value by eliminating manual processes. Review which processes take the most of your finance team’s time and decide whether they can be automated.

·         Leverage the power of AI - AI is there to assist you in your role by replacing lengthy, costly, and error-prone processes so that you can focus on higher-value work.

·         Choose a flexible solution – flexible reporting requires flexible solutions. When considering automation and improvements to the close process, ensure you choose a flexible solution that can integrate into your systems as easily as possible.