Optimizing the Close

Organizations of all sizes point to the financial close as an area in need of process optimization. For accounting teams, the close is a complex and multistep process that involves input and execution from data and people that are spread across different entities, geographies, time zones, and systems. SAPinsider members have highlighted financial close as one of their top pain points. Over 50% of respondents to the SAP S/4HANA Finance and Central Finance State of the Market 2023 Benchmark Report said they are evaluating automated financial close solutions—the highest share of any technology. This indicates that companies recognize they need financial statements that are thorough and can be produced efficiently, quickly, and accurately. Financial Close Issues Despite the importance of the process, financial close can sometimes be overlooked. Many organizations rely on outdated and manual processes to address the close. That can lead to significant issues, including:

• Delays – The typical financial close process requires teams to run jobs, monitor outcomes, and manage dependencies. To work through this process, teams often coordinate through time-consuming meetings and long email threads. That can slow down reporting and limit reliable data needed to make important business decisions.
• Errors – Since it is such an involved process, financial close requires teams from disparate departments and sometimes different physical locations to coordinate. “When you have all these different teams that are siloed and you have different activities being performed a different way at different locations, bottlenecks stopping and starting the process, dependencies that aren't documented or highlighted, all of those things increase the risk of error,” said Molly Boyle, Head of Solution Strategy at BlackLine. 

SAP Closing Activities Ripe for Automation

Some of the complexity of managing and executing a successful close process comes from the fact that activities aren’t all performed in one place. Some steps are performed outside the ERP while others are executed directly in SAP. For the non-SAP closing activities, which have traditionally been performed in spreadsheets, organizations often focus on optimizing close within third-party cloud applications such as SAP solution extensions from BlackLine. Yet there are often significant opportunities for streamlining and automating the ERP-based financial close processes. Although executed in SAP, many ERP closing activities take significant human effort, create bottlenecks, and introduce unnecessary risk to the overall close. Examples of manual closing activities include:

• Opening and closing account periods and controlling locks
• Check Suspense Accounts for Zero Balance
• Allocation and Assessment Cycles
• Settlements, Capitalization, and Depreciations
• Validating GL Vendor Line Balances
• AP Payments
• Overhead Cost Orders
• Product Cost Planning
• Report Distributions
• Milestone Notifications (all tasks have been performed Day -1, -2, -3 closed)
• FX Currency Valuation
• Automatic Aging and Balance Threshold
• FI to PCA comparisons
• Validate up to five different SAP Report Totals

Adding to the complexity, the teams performing these activities are often siloed or dispersed across time zones, geographies, and entities. Cross-team communication often takes time and results in delays that can have a waterfall effect, delaying the close and causing finance teams to work long hours at the end of the month.

Smart Close

BlackLine offers Smart Close, which complements BlackLine’s cloud solution to automate and expedite those specific parts of the close that must be done within the ERP. Smart Close eliminates manual processes such as running T-codes, analyzing and validating results, running additional checks, and more. That helps streamline the process, minimizing the time and effort the team has to spend on the close. “The rest of the BlackLine Suite is addressing and modernizing key processes like account reconciliations, journal entries, and transaction matching. Smart Close augments that to address the SAP activities and takes about 80% of the production of data away to where users are now managing the close by exception, which is the 20%,” said Kane Peschl, Director of Smart Close Value Architecture at BlackLine. The overall close coordination is now handled by Smart Close, “no more picking up the phone, sending emails and chats to determine what the status of the close.” By simplifying, standardizing, and automating what were once manual processes, Smart Close helps organizations minimize risk and re-deploy resources. Many organizations have reported that they are able to complete their financial close in less than half of the time, which frees up finance teams to work on other strategic projects that align to their organization’s top priorities. “Smart Close allows organizations to have more time for value-add analysis. They can evaluate how their business is performing, identify operational challenges, and review sales. Before this, it was just not possible. Finance teams were too preoccupied with the operational functions of the business,” said Peschl.

Running a Proactive Close

Beyond just eliminating errors, Smart Close drives a framework on how businesses should operate. Smart Close can help standardize process with templates, pre-built steps, and other capabilities that help companies adopt leading practices. Smart Close also captures every step of the process, building an audit trail to ensure that risk is minimized. “If you can perform your validations, your checks, and your test run earlier in the close, you can weed out the inconsistencies and the exceptions before you get into actual critical day of close activities. That allows the horizon to smooth out,” said Peschl.

Enabling Automation

Automation can reduce the time it takes to execute a given step in the financial close process. But Smart Close can reduce the time between steps, eliminating costly bottlenecks. “Smart Close enables SAP users to act more human and less robotic. They can analyze the data, scrutinize it, and try to figure out what is different on a month-to-month basis instead of going in and pushing the buttons that the SAP should have been able to do out of the box. It is an automation engine,” said Tim Boulay, Senior Value Architect at BlackLine. Without this solution, running a billing job through accounts receivable can take hours, and the next step in the process cannot begin until someone from the accounts receivable team gets in contact with the next team. That stop-and-start approach adds significant time to the overall close process.

Streamlining the Move to SAP S/4HANA

Many organizations are prioritizing ERP transformation and moving to SAP S/4HANA. The process is a journey that requires significant investment and resources, which often results in organizations’ hesitation to take on other implementations. Yet, quick wins and early value are an important part of a successful ERP migration, and many SAP customers have deployed Smart Close ahead of an SAP S/4HANA transition to help de-risk the process. When organizations simply move their existing processes from a legacy ERP environment to SAP S/4HANA, they miss opportunities to improve processes and adopt leading practices. Introducing Smart Close into ECC ahead of the move to SAP S/4HANA gives organizations the ability to automate repetitive or manual processes, standardize tasks and workflows, tighten up internal controls, and lighten the workload for IT teams. “If you stand up a standard framework, an automated process that is coordinated, linked, and has the workflow of your old ECC environment becomes the rubber stamp on the close template for how you take it over to S/4HANA. You are simply taking an automated task from an automated system to a new system that's also going to be automated as well. So now you have automation in both places. This helps facilitate the transition from left to right, and you're standardizing as you go,” said Peschl.

A Win for Accounting and IT

An additional benefit of Smart Close is that it is owned and operated by the business. IT teams have a lot on their plate. They are already managing multiple systems and projects, and like F&A, they have limited resources to do it with. One of the benefits of Smart Close is that it requires little to no IT time. This is a win-win, because F&A can deploy a solution that improves their process, and IT can focus their capacity on critical operations of the overall organization. “IT traditionally controls the solution until they run into a problem, and then they hand over the issue or exception to the business user. Then it is up to them to validate what went wrong, take this back to the IT group to have them fix it, they run it, and then it goes back to the business to validate it again. There is a tremendous amount of risk and time loss in between these two sequences,” said Peschl. Running a business-owned solution allows business leaders to focus resources on strategy. Finance teams have purpose-built automation and the ability to leverage what they already do inside SAP today. They also can avoid going to IT for any needed customization.

Delivering Customer Success

Hundreds of SAP customers run BlackLine Smart Close to streamline and automate their SAP closing activities. Recently, a large multinational food company came to BlackLine because it had been blindly running its close and realized the process was no longer sustainable. The company had not rationalized its business. It had no formal tracking and had multiple Excel workbooks living within various teams. The process lacked coordination and automation. To address these challenges, the company first evaluated where it was spending its time. With enhanced visibility and tracking, it adopted Smart Close to automate more than 80% of the financial closing activities. The teams that once had to spend significant time on financial closing activities were then able to spend their time on analysis and value-adding activities.

Conclusion

The financial close is a challenging and complex process that, for many organizations, is becoming unsustainable. In order to embrace their expanding and evolving roles, F&A teams must work to eliminate bottlenecks, reduce risk, and accelerate business insights by simplifying, standardizing, and automating their financial close processes. Smart Close is embedded within SAP and works in concert with the rest of BlackLine’s financial close solutions to offer end-to-end. The business-owned solution can be deployed rapidly to add automation and standardization capabilities to change the way that accounting works. Smart Close can drastically cut down on the time it takes to close, as well as minimize the risk of errors while fulfilling data needs for decision-makers. This allows finance teams to spend their time on activities that add significant value to their organization.