I've been fortunate lately to have some great conversations with CFOs of complex, high-tech businesses. We talked about the challenges software companies face in running their finance organizations and it struck me that they share the same challenges. Namely, they all see that their peers all too often make life difficult for themselves by grappling with some of the most basic financial processes—in particular, the monthly and quarterly close.
There's nothing exciting or sexy about the financial close process—and financial leaders need to find ways to make sure it stays that way. But global or multi-subsidiary businesses which rely on a hodgepodge of accounting software often struggle for weeks—or longer—just trying to boil down their results to a single balance sheet. Data conversions, spreadsheet merges and late nights reconciling data do nothing for the health of your business, and they certainly don't encourage future expansion and growth.
Building and maintaining a multi-subsidiary tech business is no small feat. Transaction volumes are growing as high-tech companies branch out to new geographies, social selling channels, subscription sales and mobile platforms. New markets mean new regulators and tax codes. And revenue recognition standards continue to demand more diligence and transparency. Mastering these challenges positions companies for smooth growth and improved margins. Spending inordinate amounts of time on quarterly close not.
Besides freeing up skilled accounting hours for more challenging tasks like revenue recognition and compliance, shortening the financial close process boosts the value of accounting data to the rest of the organization. The executive team and directors can hardly have much confidence in the analysis Finance provides if Finance can't stand behind the numbers without three weeks' notice. Once your financial close becomes an automated, cookie-cutter process, you can offer meaningful real-time dashboards to the executive suite and mid-management. Fresher, transparent numbers mean fewer surprises, and reduce the chances of an unexpected revenue miss. Many of today’s fastest growing software companies point to a rapid 4-5 day close as a key to their success.
It's frustrating to watch a company struggle to succeed because it can't focus on some of the simplest, time-honored pieces of advice out there: "Don't sweat the small stuff." Financial close and consolidation needs to be "small stuff" so your business can invest time and energy in the value-added, complex processes that separate a successful company from an also-ran.
Kimberly Odom - Director of Vertical Marketing, Software