The State of Automation in the Financial Close Process

The pressure to reduce manual and repetitive financial accounting tasks is the primary driver for automating the financial close process, according to preliminary SAPinsider research. At the end of January we will publish comprehensive results and analysis of this study, titled “Automating the Record-to-Report and Financial Close Process.”

Organizations are struggling to reconcile disparate financial systems and need a more integrated, automated solution. According to initial survey respondents, companies on average support seven different systems, delaying and complicating their close process. More than half of financial teams aim to apply further automation technologies to impact all aspects of the financial close. The current average time to close among our respondents is eight days.

Nearly one-third of survey respondents (29%) see their SAP S/4HANA migration as a catalyst for reexamining their financial close process and applying standardization and automation to generate efficiencies. SAP remains the prevalent system of record for finance and accounting. Nearly half of accounting teams in our survey (49%) run 80%-99% of their financial activities on an SAP ERP system, whether SAP ECC or SAP S/4HANA.

Companies Have Started Their Automation Journey and Are Looking to Expand

Most companies in our study are well along the path to automation, but there is still ample room for growth. Seventy-one percent of accounting teams in our survey report that they currently run automation solutions in their core record and financial recording processes. Nearly a third of respondents indicate that these processes are 76%-100% automated, the highest level of automation in our survey.

Over half (57%) have automated or are in the process of automating journal entry management and reconciliation management. However, the least automated area is disclosure management and filing, with only 18% of organizations automating this aspect.

Financial Teams Crave Stronger Master Data and Better Documentation of Processes

For many organizations, the financial close process is complex, relying on disparate data sources and exceedingly manual workflows. Almost two-thirds of our survey respondents (65%) say that real-time, harmonized, and integrated master data is a critical requirement for rethinking their financial close. Just over half (51%) of financial professionals in our study emphasize the need for a better and more completely documented electronic audit trail to guide their automation strategy. Additionally, 48% highlighted challenges in group accounting and management reporting.

Regarding tools and technologies supporting the record-to-report process, a majority of customers naturally rely on their core ERP solutions, SAP ECC and SAP S/4HANA. Given the importance of data, many organizations also leverage SAP Business Warehouse (35%) and its newer version, BW/4HANA (26%). Accounting teams in our survey are also beginning to evaluate and implement third-party solutions. Sixteen percent of survey respondents are using SAP Account Substantiation and Automation by BlackLine, while another 12% rely on BlackLine’s Intercompany solution. BlackLine’s unique integration and partnership with SAP—being on the SAP product list and sold by SAP account representatives—makes it a popular choice.

Third-Party Financial Close Solutions

When it comes to other third-party financial close solutions, several organizations are being evaluated in addition to BlackLine:

• DocuSign: Although not a traditional close partner, Docusign helps automate workflows and processes by streamlining electronic signatures and approvals. Their Signature Management solution allows seamless access, signing, and sending of important documents across devices.
• FloQast: FloQast offers easy-to-implement and user-friendly functionality, claiming that training and setup can be completed within two weeks. Their solutions integrate with both ERP systems and Excel, with an average impact of reducing the financial close by three days. Their customer base exceeds 2,800.
• HighRadius: HighRadius provides a suite of automation solutions that extend beyond the financial close to include order-to-cash, accounts payable, payments, and treasury and risk management. Their consolidation and reporting solution enhances efficiency, reduces manual adjustments, and accelerates reporting processes. HighRadius serves over 1,100 customers.
• Trintech: Trintech offers a comprehensive suite of solutions supporting all aspects of the financial close process, including account reconciliation, transaction matching, close task management, intercompany accounting, and reporting and analytics. Trintech continues to invest heavily in AI, incorporating new features and functionalities into its product suite.

 The Journey to AI

Most finance and accounting teams in our survey are still early in their journey to applying Artificial Intelligence (AI) to financial close processes. Sixty-two percent of respondents report being significantly behind their competition in this area. Only 14% consider themselves somewhat ahead, while none claim to be significantly ahead. This underscores the relative immaturity of AI application in financial close processes.

What This Means for SAPinsiders

Be Open-Minded in Seeking Solutions to the Financial Close

There is always room for improvement in optimizing your financial close and record-to-report processes. SAP and third-party vendors continue to innovate their solutions. Explore and build a practical understanding of how these solutions can enhance your finance organization.

Prioritize Data and Documentation

Most companies manage a wide range of financial systems and databases. Strengthen master data management capabilities and maintain thorough documentation of both automated and manual processes. This provides a solid foundation for evaluation and improvement.

Advance Organizational Knowledge of AI

Expand your understanding of AI and its practical application in finance and accounting. SAP and third-party vendors are integrating AI into core business processes like record-to-report. Read case studies, attend demos, and identify areas where AI can benefit your organization. Developing AI skillsets and knowledge will enable you to scale pilots across different processes and organizational areas.