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Closing smarter — not harder

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Patricia Tran Regala

Taxwise Or Otherwise

I transferred recently from PwC US to PwC Philippines in October 2017. Since then, I have gotten to know many talented and highly skilled individuals within the firm and in various sectors here in Philippines and in Southeast Asia. They have assisted me with my acclimation and taught me a lot, both personally and professionally. For this, I am grateful.

Last Friday, I met a group of friends for happy hour. I saw one of them looking exhausted. When I asked her why, I got a consensus response of ‘it’s month-end’! I was dumbfounded. It seems like that one statement explains it all.

Companies in the Philippines struggle during the month-end and year-end process, with employees having to work diligently to meet challenging deadlines. I did not quite understand why companies in the Philippines experience this, while companies in the US do not.

I surmise that Chief Financial Officers (CFOs) in Philippines are under significant pressure to drive productivity improvements and maximize the return on organization’s resources. These organizations could benefit from reengineering the closing process — or what we call “SmartClose.”

SmartClose is a methodology created by PwC that offers a fresh approach to closing and reporting.

It involves a comprehensive top-down examination of every aspect of business reporting from strategy to IT integration and process management. Based on the results of the diagnosis, it streamlines and optimizes systems, processes, and organizational structures, thereby delivering significantly faster and more reliable business information and creating competitive advantage.

In this article, I will share with you suggested value-added lessons learned during my tenure with US and Philippine clients.

Focus on value. First, ask yourself: “Does this process add value to my organization?” Here, you can determine if your organization needs SmartClose to fix its closing problem. The strategic vision for most organizations’ accounting closing and reporting process is to reduce overall workload. Doing so allows the organizations to shift efforts towards more value-adding activities such as: decision support, process and business risk management, and value-added analysis.

Intimately know your processes. Even process owners are surprised by the tasks performed by their colleagues. Sometimes, subject matter experts in finance discover hidden details, inconsistencies, workarounds and fixes that occur every day. The most common alternative is to capture the core elements of the closing process through process mapping sessions and validation. This approach is useful when analyzing the closing process.

Place responsibility on the process. In every closing process, employees spend a considerable amount of time reworking errors, rewriting reports, and preparing reclassification and adjusting entries. Root causes need to be identified and addressed to mitigate future risks. For example, by referring to systems and processes together and giving the process the same inanimate quality, stakeholders become more open to discussing issues they encounter. This approach places responsibility on the process, not the process owner.

Mark unessential tasks. Many improvements fall into the “stop-doing-it” category. Examples include multiple layers of review, immaterial adjusting entries and analysis, producing unused reports, coding errors at the source, and last-minute processing. The SmartClose approach helps to identify which processes to eliminate and those requiring improvement. Understanding the difference will have an impact on streamlining the closing process. A faster, smarter close can be a challenge; it requires commitment from all stakeholders involved.

Aim to do it right the first time. Finance people have always been the target of a joke referring to our ability to spot and correct errors. Other people stretch the joke further by saying “It’s in our DNA.” This talent can be utilized in performing other essential tasks such as analyzing management reports and developing financial trend analysis rather than spotting errors. However, based on my experience, 30% of overtime spent during the closing process was caused by transactions being posted incorrectly at the data source. Management needs to enforce a “do it right the first time” attitude. They need to develop a formal issue escalation process and proactively manage issue resolution. It’s also advisable to measure the department’s ability to provide correct information during initial data entry and to review the historical reconciliation issues in detail to identify the root causes of the erroneous entry. Applying SmartClose will help you achieve first-rate quality in your closing process and eliminate the need to analyze them again.

Empower your employees. Some employees will quickly adopt the process and become the champions of your SmartClose initiative. They are the ones that show enthusiasm and curiosity to try something new, generate good ideas in the working sessions, and are willing to change. Empower these individuals regardless of their staff level and make sure that they continue to play a critical role during future working sessions, especially during implementation to achieve the new target operating model.

Transform knowledge. Begin your transformational campaign with training. A one-hour introduction to SmartClose prepares the team for action and creates a common language critical to successful working sessions. Use this time to introduce the standard templates and documentation tools prior to beginning the effort. Make the training interactive and lively. Create your own training style and own the closing process.

There is no quick fix to achieving a faster, smarter close. It takes commitment among all stakeholders involved. Success requires determination and attention at all levels within the company. Management needs to set the tone at the top and ensure stakeholders’ buy-in. At the top of the organization, the CEO and CFO must make smart close a priority to ensure that closing and reporting objectives are achieved.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of PricewaterhouseCoopers Consulting Services Philippines Co. Ltd. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Patricia T. Regala is a senior manager with the Management Consulting Practice of PricewaterhouseCoopers Consulting Services Philippines Co. Ltd., a Philippine member firm of the PwC network.

+63 (2) 845-2728 local 3235

patricia.regala@ph.pwc.com