Highlighting the Importance of Financial Closing

Here at the Bike Company, we have a lot of pressure to change and adapt due to a rapidly evolving social and business landscape. The finance department faces challenges that are reshaping the nature of its operations. Market volatility has become a defining characteristic, impacting commodity prices and stock values, necessitating a heightened need for adaptive financial strategies. Additionally, demographic shifts are posing hurdles in hiring and retaining skilled professionals, exacerbated by shortages of experienced workers.

Regulatory frameworks, especially those emphasizing sustainability, are becoming more stringent and persistent, requiring ongoing compliance efforts. The rise of protectionism is altering global supply chains, prompting near-shoring and repatriation of operations amidst geopolitical realignments, thereby adding complexity to financial planning and risk management.

The imminent integration of disruptive technologies further complicates the financial landscape, offering both opportunities and challenges as markets evolve. From subscription-based models to everything-as-a-service and pay-as-you-go structures, we and our competition are reinventing our core models, demanding agile financial strategies to navigate these transformations effectively. Amidst these shifts, the finance department is compelled to adopt innovative approaches, leveraging technology and strategic foresight to ensure financial resilience and sustainability in an increasingly dynamic environment.

One of the fundamental motivations for us to use a modern and centralized financial system is to establish high financial integrity and to reduce the time to close: to tailor our record-to-report process in a way that ensures procedural integrity and caters to data integrity and reconciliation.

For each step of the Record-to-Report process, these are the priorities:

• Create financial records. In the create financial records phase, we need to automate the recording of compliant financial data for all of our operative processes.
• Perform financial accounting. In regards to our financial accounting, we want our activities to be spread out throughout the period to reduce close pressure and enable continuous insights for individual financial entities & the group.
• Perform financial closing. Your objectives and needs for your financial close are:
  • Lean, automated entity close.
  • We want our accountants to just review outliers. Errors should be identified & resolved automatically as much as possible.
  • Lean, efficient consolidation.
• Perform financial reporting. In our reporting, all business users should have easy access to all the financial numbers they need with:
  • A good overview
  • Drill down, slice & dice to retrieve the insights.
  • Assistance, especially for our occasional users.
  • Commenting functionality in order to leverage insights with auditors and stakeholders.

Overall and throughout the Record-to-Report process you've got the following priorities:

1. Keep and ensure high data quality & full data integrity: Assurance, Analytics, Compliance
2. Automation: avoid manual activities wherever possible
3. Time to close: continuously reduce your backlog by continuous close, a full orchestrated process (end-to-end), and comprehensive monitoring.

Our finance department tries to proactively address these challenges by implementing strategic initiatives that optimize processes, enable rapid response to business needs, and enhance risk management and compliance.

1. Optimizing Financial Processes:
   1. Introducing Cost-Saving Automation: Embrace automation technologies such as robotic process automation (RPA) and machine learning algorithms to streamline financial processes. Automate routine tasks like invoice processing, expense management, and reconciliation to reduce manual effort and minimize errors. This not only saves costs associated with labor but also accelerates process cycles, improving overall efficiency.
   2. Leveraging Insights for Business Performance: Utilize advanced analytics tools to derive actionable insights from financial data. Analyze historical trends, cash flow patterns, and key performance indicators (KPIs) to identify areas for improvement and growth opportunities. Use predictive analytics to forecast future financial outcomes and proactively adjust strategies to optimize business performance and scalability.
2. Responding Quickly and Effectively:
   1. Real-time Financial Insights: Implement real-time reporting and dashboard solutions to gain instant visibility into financial performance. This enables the finance team to respond promptly to emerging challenges and make data-driven decisions. Utilize cloud-based financial systems that provide up-to-date information accessible from anywhere, facilitating agile decision-making.
   2. Predictive Analysis for Growth Optimization: Leverage predictive analytics to anticipate market shifts, customer behaviors, and economic trends. Use scenario planning and predictive modeling to simulate different outcomes and identify optimal strategies for growth. By proactively predicting results, the finance department can take preemptive actions to capitalize on growth opportunities and mitigate risks.
3. Managing Risk and Compliance:
   1. Integrated Risk Management: Integrate financial and sustainability reporting to proactively manage risks associated with environmental, social, and governance (ESG) factors. Implement unified carbon and financial accounting practices to assess and mitigate sustainability-related risks. Utilize risk management tools to identify potential threats and establish robust mitigation strategies.
   2. Transparent Sustainability Reporting: Stay ahead of regulatory requirements by disclosing sustainability KPIs and results in a transparent manner. Implement sustainability reporting frameworks such as GRI (Global Reporting Initiative) or SASB (Sustainability Accounting Standards Board) to measure and communicate environmental and social impact. By demonstrating proactive commitment to sustainability, the finance department enhances transparency and builds stakeholder trust.

In summary, by optimizing financial processes through automation, leveraging data-driven insights for performance optimization, responding quickly to challenges with real-time information, and integrating risk management with sustainability reporting, the finance department can proactively address modern challenges and position the organization for sustainable growth and success. This strategic approach not only enhances operational efficiency but also fosters resilience and innovation in the face of evolving business dynamics.

A core tenant of our optimization and in line with the above objectives, we are transforming the way we handle the period and fiscal-year close by using SAP S/4HANA Cloud and utilizing a central SAP Advanced Financial Closing instance for all our companies.

Financial closing consist of a list of activities (some to be done in parallel and some in sequence) to close the financial books (get numbers for reporting) and disclose results.

Typically, since we didn't have a unified closing orchestration solution for our companies they either managed their closing tasks offline with Excel spreadsheets or they don't really orchestrate closing activities at all. This resulted in lack of visibility and collaborations based purely on offline communications with little to no visibility and no controls. In addition, we would need to wait weeks to get insights into the numbers across the whole group.

Bike Company is not unique, according to a recent Gartner study 75% of companies take 10 days or more to close their books.

Modernizing our ERP and the closing activities brings a lot of opportunities:

• Automate activities in real-time so they can see financial data during the month. Automate controls and validations so users can focus on what needs attention (instead of relying on spot checks).
• Automate tasks to reduce effort, increase accuracy real time and accelerate the close.
• Increase collaboration across time zones, regions, etc.

Our technology strategy for achieving operational excellence in closing is to implement a modern cloud based ERP across our group, namely SAP S/4HANA Cloud, and to pair it with a central dedicated and tightly integrated closing orchestration solution: SAP Advanced Financial Closing. Paired with a real investment in people upskilling and putting in governance measures, we are confident that we can minimize the time wasted when closing our books.

The financial close process is a critical function for any organization, ensuring accuracy, compliance, and transparency in financial reporting. SAP Advanced Financial Closing solution enables organizations to plan and orchestrate the financial close with automation, improving governance and compliance, driving efficiency, and gaining transparency.

SAP Advanced Financial Closing acts as a hub to orchestrate and monitor financial closing centrally, enforcing dependencies between tasks and eliminating unnecessary waiting times even in a distributed landscape.

The SAP Advanced Financial Closing offers capabilities that streamline and enhance the closing process:

• Define. Plan and orchestrate repeatable, pre-delivered financial close processes with sequenced, automated tasks and workflow across systems, teams and time zones.
• Process. Increase efficiency and speed through automation of touchless closing tasks such as SAP jobs and balance validations, with enhanced collaboration and controls.
• Monitor. Achieve real-time insight into your financial close process for better business decisions and increased transparency.

More analytically, SAP Advanced Financial Closing will enable us to:

• Automate Closing Activities: It automates repetitive tasks involved in the financial close. This automation reduces manual effort, minimizes errors, and accelerates the overall closing cycle.
• Standardize Closing Procedures: Our organization can standardize and enforce consistent closing procedures across departments and entities. This standardization ensures compliance with regulatory requirements and internal policies, improving governance and control over the closing process.
• Enhance Collaboration: It facilitates collaboration among finance teams and stakeholders by providing a centralized platform for communication and documentation. It enables real-time visibility into closing status, milestones, and issues, fostering effective teamwork and communication.
• Improve Reporting and Analytics: It integrates with SAP's robust reporting and analytics capabilities, allowing organizations to gain actionable insights into financial performance during the closing process. Users can analyze key metrics, identify trends, and make informed decisions to optimize financial outcomes.
• Ensure Compliance and Audit Readiness: It supports compliance with regulatory standards and internal controls by enforcing segregation of duties, audit trails, and documentation requirements. It helps organizations maintain audit readiness and streamline external audits by providing comprehensive documentation and transparency in the closing process.

In summary, SAP Advanced Financial Closing empowers organizations to streamline and optimize the financial close process through automation, standardization, collaboration, and enhanced reporting. Financial entities can achieve greater efficiency, accuracy, and transparency in their financial operations, ultimately driving better decision-making and compliance with regulatory requirements.

SAP Advanced Financial Closing helps us plan, execute, monitor, and analyze the financial closing tasks for all of our group's entities.

The solution supports all our various stakeholders, such as:

• Accounting Expert

  • Kick-start transformation of financial closing with ready-to-use content.
  • Re-use templates across companies and cycles.
  • Use sequencing and dependencies to fit your organizational needs.
  • Leverage different task types to automate tasks via jobs, facilitate manual tasks, and embed account balance validations.

• Accountants

  • Review tasks executed automatically, schedule tasks and process manual activities.
  • Review and address exceptions resulting from automated validations.
  • Review the progress of the closing with an intuitive graphical view of all task dependencies.
  • Add comments and attachments and communicate with other employees to increase collaboration and auditability.

• Accounting Manager

  • Receive e-mail notifications for tasks ready for your approval.
  • Review approval requests centrally, with one-click navigation to the closing tasks to see all details/results.
  • Enforce SOX controls (segregation of duties between processing users and approvers).
  • Automated log to enable the entire audit trail and increase compliance.

• Head of Finance

  • Achieve real-time insight into the financial close process to make better business decisions.
  • Drill-down to closing tasks to identify root cause and responsible colleague in case of issues or delays.
  • Monitor performance KPI.
  • Analyze critical paths to optimize your close continuously.