SAP BLOG R2R Series Blog #5: Hard Close, Fast Close, Soft Close and Continuous Accounting

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22 Ara 2017
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This is Blog #5 in our Record to Report Blog Series. You can find the complete series outlined HERE.

The financial close (aka closing the books, the period end close) the has many aspects to it. The hard close, fast close, soft close and continuous accounting are all terms that work together they do not replace each other. Let’s start by discussing each:

THE HARD CLOSE

Each period (month, quarter, year), it is usually mandatory to produce financial reports. Accuracy is of the utmost importance. It is essential for C-level executives to have absolute confidence in the numbers they report. In many situations, legal compliance is mandatory. Additionally, finance organizations need to respond to increasing external scrutiny. As world politics change and evolve, we need to comply with strict regulations by jurisdiction and industry.

THE FAST CLOSE

I have been closing the books myself or helping companies close their books for over 20 years. Since the beginning of my career, the goal of closing the books faster has always been top of mind. Speed and efficiency have always been key. Wherever you can automate, standardize, or centralize a closing process is a potential for improvement. Technology continues to enable this, year after year.

THE SOFT CLOSE AND CONTINUOUS ACCOUNTING

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The diagram above illustrates how the period-end close can change with continuous accounting. In a traditional close process, you wait until the end of the period to start addressing closing processes. With continuous accounting, you spread many period-end processes throughout the period. This makes the period-end close run faster and provides better financial insight during the period. As accountants, we understand that all period-end activities cannot be executed during the period, but many can, thus providing insight earlier and the ability to work with operations to course correct sooner.

We can improve management and control of operations and allow for immediate decisions. We can highlight the service provider approach of financial departments. We can react to requirements for faster filing.

Continuous accounting is the future of accounting. It is happening right now.

As we digest the concept of continuous accounting, it is important to understand that continuous accounting does not replace a hard close. There will always be a hard close, and there will always need to be financial statements reported at the end of the period. I’ve yet to see a company require real-time annual reports that change to reflect the general ledger every time a stakeholder opens them.

However, being able to access that real-time data during a period can provide insight into an organization that can be harnessed throughout the period. Not all financial data is valuable before the period end, but much can be. It is that paradigm shift of understanding that is transforming the function of finance departments in many companies. Perhaps it can in yours.

Call to action: To learn more about process efficiency in the Close, join us and customers at the virtual event for Financial Close and Reporting.


You can find all blogs available in our Record to Report Blog Series HERE.

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