Welcome to the ‘Virtual’ Financial Close
December 09, 2020
What does it take to “close your books?” How long exactly: five days, nine days, two weeks? In just the past few months, the world has changed due to COVID-19 and companies that need to perform a monthly or quarterly close have had to adapt quickly to adjust to their new remote situation. This adaptation is that it does not always occur seamlessly or quickly; when faced with deadlines, the process can be difficult to balance. So what options are there? Within a world of digital solutions, none is as important or as widely needed right now as the virtual financial close. A routine monthly/quarterly activity that typically took up to two weeks and the involvement of an entire accounting department to complete can now be completed virtually in a continuous, real-time manner.
With many finance teams now working remotely and as more companies look to continue their remote workforce, the adoption of a virtual financial close is being accelerated. A ‘virtual close’ utilizes cloud-based accounting systems to extract data from the general ledger that includes accounting transactions and balances to perform the tasks -- such as reconciliations and journal entry postings -- necessary to complete financial reporting. At period-end, the accounting and finance teams can utilize a virtual close to aggregate necessary financial data. This significantly reduces the time need to ‘chase down’ data from different departments. Using pre-set automated controls, defined period-end tasks, and connections to other related software (i.e., application program interfaces [APIs]), the virtual close can help quickly extract and organize vast amounts of financial data all into one area. What traditionally would take weeks and many, many emails takes only minutes.
By leveraging automation, the virtual close can help free employees from working on manual and repetitive activities such as posting journal entries at month-end; instead allowing them to focus on the more complex items like accounting rules and reporting disclosures. Not only does the virtual close allow companies to complete and close their period-end books quickly but it also allows them to access real time financial information and, due to less human interaction, the information can often be more accurate by leveraging preset rules rather than manual inputs.
COVID-19 has changed how companies interact with teams, other employees and even their auditors. By implementing a virtual close, companies can prepare themselves for the future. No matter where employees are located, implementing a virtual close can only add a level of assistance to the financial close. Whether by freeing up employees for more complex work, assisting with timeliness, or adding a level of accuracy that occurs with automation, the virtual close is a powerful tool.
PRTS Intelligence Newsletter - Q4 2020