Modernize record-to-report

Succeeding in economic uncertainty doesn’t happen on its own. It requires purposeful agility, rapid innovation, and the right kinds of platforms and ecosystems. How to capitalize on these opportunities and lead decision-making? Look to finance functions as your key.

Yet, nearly half of finance function time is still spent on transactional activities. In fact, fewer than 10% of activities are dedicated to analysis and action—areas crucial to supporting improved business decisions. To provide strategic, financial, and operational feedback on the performance of the organization, finance needs to transform and modernize record-to-report, the end-to-end process of recording, closing, consolidating, and reporting on financial data at the period end.

Typically, the record-to-report process encounters a number of key challenges.
 

Journal entries:
 

•  Inefficiency and variability arise with existing activities. Journal entries are created with many repetitive tasks, and manual follow-ups are required for much of the input data.
• Disparate enterprise systems coupled with lack of data access and process digitization often create a lack of transaction visibility. As a result, manual interventions in the process compromise the audit trail.
• The inability to review and verify all in-process journal entries leads to delayed close.
• Decisions cannot be made in real time. Limited business insights are available or delayed, often rendering them useless.
   

Reconciliations:
 

• Siloed disparate processes involve manual and repetitive work.
• Few insights are available to facilitate meaningful forecasts or real-time decisions.
• A lack of transparency and traceability exists with no end-to-end visibility of siloed data.
• Finance staff encounter a poor user experience with no unified view of end-to-end operations that would allow them to work seamlessly without hindrances.
   

Often, these challenges pile up, resulting in complexity, time-consuming activities, errors, and inaccurate financial results. An ideal record-to-report process will digitally modernize finance operations with virtual and continuous accounting to better meet compliance requirements, improve efficiency, and enable business leaders to make agile  financial decisions. The financial reports produced by the record-to-report process help CxOs with strategic planning in terms of performance goals and actions required.

An increase in efficiency in record-to-report can directly reduce process costs since on average record-to-report is approximately 20% of all finance function FTEs.

The IBM Institute for Business Value (IBV) Performance Data and Benchmarking Program performed a statistical analysis of data collected in 2021 and 2022 from more than 500 finance managers globally. The analysis correlates the adoption of exponential technologies with outperformance in a variety of record-to-report performance measures.

How data management sets the foundation for record-to-report

We determined that top-performing organizations in the cycle time to perform the monthly financial close have three things in common: maturity of information availability, the use of robotic process automation (RPA), and implementation of artificial intelligence.

When we segmented organizations based on the volume of journal entries processed annually, we saw differences in the relative importance of those three factors (see figure). For organizations that process fewer than 1.5 million journal entries annually, the top predictor of cycle time was the maturity of information availability. For organizations processing more than 1.5 million journal entries annually, the top predictor of cycle time was the implementation of artificial intelligence.
 

Key factors in estimating the speed for the monthly close

Data is the heart of record-to-report. The emphasis on information availability can be explained by struggles with:
 

• Gathering and processing structured and unstructured data from different sources
• Collecting and consolidating a large amount of data
• Validating and reconciling data.
   

For those organizations processing fewer than 1.5 million journal entries annually, reduction of this data’s structural complexity becomes a precondition. This requires an enterprise-wide data governance framework: data standards and rules to collect, use, and share data simplify the environment.

A comprehensive and consistent enterprise architecture is important to the scaling and compatibility of workflows. Cloud computing can help with the control and sharing of data. Without this cloud environment, finance organizations will struggle to develop and maintain not only financial and operational data, but the integration of the two. In addition, cloud computing allows access to exponential technologies, such as automation and artificial intelligence, and supports the seamless flow of data, enabling finance organizations to use it in new ways.

In fact, 61% more organizations that are leading or optimizing in data availability and analysis capabilities have adopted cloud technology (as opposed to on-prem or hosted solutions) for their general accounting and reporting processes compared to other respondents with lower maturity (see figure).
 

Adoption of cloud: Cloud computing assists with data availability and analysis.

With only 35% of respondents reporting adoption of cloud technology for their general accounting and reporting processes, cloud computing presents an untapped opportunity for many finance organizations.

Start your record-to-report modernization

With proper data management, the combination of automation and artificial intelligence is powerful for record-to-report. These exponential technologies provide tangible business outcomes, with greater than two days’ close cycle time reduction achievable.

A 100% on-time close calendar, 70% plus transactional efficiency by reducing actions associated with data processing, and 40%-60% cost reduction are all possible. In terms of effectiveness, organizations could generate a more than 50% improvement on financial opportunity and risk insights.

Download the report to learn more about how data management, automation, and artificial intelligence can transform and modernize record-to-report. We conclude the report with an action guide that provides clear next steps on applying these exponential technologies to record-to-report.